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BP p.l.c. (NYSE:BP)

Q1 2014 Earnings Conference Call

April 29, 2013 09:00 AM ET

Executives

Jessica Mitchell - Head of IR

Bob Dudley - Group Chief Executive

Brian Gilvary - Brian Gilvary

Analyst

Jason Gammel - Jefferies

Irene Himona - SocGen

Doug Terreson - ISI

Theepan Jothilingam - Nomura

Oswald Clint - Bernstein

Stephen Simko - Morningstar Research

Alejandro Demichelis - Exane

Jon Rigby - UBS

Martijn Rats - Morgan Stanley

Ian Reid - BMO

Chris Coupland - Merrill Lynch

Lydia Rainforth - Bar Cap

Lucas Herrmann - Deutsche Bank

Thomas Adolf - Credit Suisse

Michele della Vigna - Goldman Sachs

Bertrand Hodee - Raymond James

Fred Lucas - JPMorgan

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. This is BP's First Quarter 2014 Results Webcast and Conference Call. I'm Jess Mitchell, BP's Head of Investor Relations, and I'm here with our Group Chief Executive, Bob Dudley; and our Chief Financial Officer, Brian Gilvary.

Before we start, I need 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 U.K. 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 welcome to everyone who’s joined us today wherever you are in the world. The first quarter has been a very productive three months for us, in the upstream we’ve made new exploration discoveries and started up new projects, in the downstream the newly modernized Whiting refinery continued to ramp up along with progress across our fuels, lubricants and petrochemical businesses and we continued our focus on safe and reliable operations across the whole of the group.

In March we affirmed BP’s proposition to shareholders out to 2018 and just to remind you of what we said, we have committed to growing sustainable free cash flow through a combination of growing, operating cash and capital discipline with the intention of growing distributions to shareholders.

As you can see from today’s results, we delivered a solid start to the year which puts us firmly on course to deliver our 2014 goal of delivering $30-$31 billion of operating cash flow at $100 a well.

So turning to the agenda, Brian will start by taking us through the results for the first quarter in detail along with a reminder of our financial framework and guidance. I will then talk briefly about on-going legal proceedings in the US before sharing some of the first quarter highlights, in our operations and at Rosneft. And finally there will be time for Brian and I to take your questions.

So, let me now hand over to Brian to take you through the numbers.

Brian Gilvary

Thanks Bob. BP's first quarter, underlying replacement cost profit was $3.2 billion, down 23% on the same period a year ago, and 15% higher than the fourth quarter of 2013.

Compared to a year ago, the result reflects higher costs predominantly non cash in the upstream business, a significantly weaker refining environment and lower production, partly offset by the return of the largest crew unit at our Whiting refinery. Compared to the previous quarter the result reflects lower costs and a stronger contribution from supply and trading in both upstream and downstream, partly offset by a significant reduction in our share of earnings from Rosneft due to the recent weakness of the rouble and the absence of the one-off benefits to BP’s share of Rosneft net income in the fourth quarter.

Operating cash flow was $8.2 billion for the quarter. We have announced an 8.3% year on year increase in the first quarter dividend to $0.0975 per ordinary share payable in June. In upstream the underlying fourth quarter replacement cost profit before interest and tax of $4.4 billion, compares with $5.7 billion a year ago and $3.9 billion in the fourth quarter of 2013. Compared to the first quarter of 2013 the result reflects higher costs, predominantly exploration write-offs and DD&A and low production and lower liquids realizations, partly offset by strong gas marketing and trading results and higher gas realizations.

Following our decision to create a separate business around our US low 48 on shore oil and gas activities and as a consequence of disappointing appraisal results, we have decided not to proceed with development plans in the Utica shale. As a result, we have taken a $520 million exploration write off relating to Utica acreage in the quarter. Excluding Russia, first quarter reported production versus a year ago was 8.5% lower primarily due to the Abu Dhabi on shore concession expiry in January and the impact of divestments. After adjusting for these factors and entitlement impacts underlying production was slightly lower.

With new major project volumes in the North Sea, Angola and the Gulf of Mexico, we have grown our total underlying production in higher margin areas. Compared to the fourth quarter, the result reflects lower costs, higher gas realizations and stronger gas marketing and trading results partly offset by the absence of the one-off benefits of production taxes in the fourth quarter and lower liquids realizations.

Looking ahead, we expect second quarter 2014 reported production to be lower than the first quarter. This is driven by planned major turnaround activity in the higher margin North Sea and Gulf of Mexico regions. We expect the turnaround impact on production to be slightly less than the impact experienced in the second quarter of 2013.

Rosneft is expected to announce first quarter results tomorrow. Based on preliminary information, we expect BP’s underlying net income related to our Rosneft shareholding to be $270 million for the first quarter. This compares to BP share of Rosneft net income in the first quarter of last year of $90 million which included only 11 days of earnings.

Compared to previous quarter, underlying net income is expected to be $820 million lower. The first quarter was adversely impacted by the revaluation of ruble and absence of adjustments made in the fourth quarter to finalize BP’s equity accounting for 2013.

BP's share of Rosneft production for the first quarter is estimated at 1 million barrels of oil equivalent per day. We expect to receive our next dividend from Rosneft in the third quarter of 2014.

In the downstream, the first quarter underlying replacement cost profit before interest and tax was $1 billion compared with $1.6 billion in the first quarter last year and $70 million in the fourth quarter. The fuels business reported an underlying replacement cost profit before interest and tax of $700 million in the first quarter compared with a $1.2 billion profit in the same quarter last year. The decrease reflects a significantly weaker refining environment partly offset by the return of the largest crude unit of our Whiting Refinery which had a planned outage in the same period of 2013 and the progressive increase in heavy crude processing throughout the quarter.

This quarter the fuels business also had a strong supply and trading contribution similar to the first quarter of 2013. Heavy crude processing continued to increase Whiting reaching about 200,000 barrels per day at the end of the quarter. It is expected to reach around 280,000 barrels per day during the second quarter optimizing to market conditions. The lubricants business reported an underlying replacement cost profit before interest and tax of $310 million compared with $350 million in the same quarter last year. The difference is primarily due to exchange rate effects on the Indian rupee, the British pound, and the South African rand. Beyond this, the result reflects continued delivery of our strategy focused on premium lubricants, leading brands, and high growth markets.

The petrochemicals business reported a breakeven result. Our major complex near Shanghai has been down for side turnaround since early March. The environment for this business continues to be challenging with strong product demand growth more than offset by excess supply.

In another business and corporate, we reported a pre-tax underlying replacement cost charge of $490 million for the first quarter in line with guidance. Guidance for 2014 remains unchanged with the average underlying quarterly charge in the range of $400 million to $500 million per quarter. The underlying effective tax rate for the first quarter was 33%, compared to 39% in the first quarter of 2013.

The rate is lower than a year ago mainly due to foreign exchange effects and the higher level of equity income from Rosneft which is reported net of tax. Guidance for the full year effective tax rate remains around 35%.

The charge for the Gulf of Mexico oil spill was $40 million in the first quarter, primarily reflecting the on-going cost of running the Gulf Coast Restoration Organization. The total cumulative pre-tax change for the incident to the date is now $42.7 billion. The charge does not include any provision for business economic loss claims that are yet to be received, processed and paid. Bob will provide an update on the legal process shortly but as we have previously advised, it is still not possible to reliably estimate the remaining liability to business economic loss claims. We will continue to revisit this each quarter.

The pre-tax cash outflow on costs related to the oil spill for the first quarter was $700 million. The cumulative amount estimated to be paid from the trust fund remains at $19.3 billion leaving unallocated headroom available in the trust for further expenditures of around $700 million. In the event that the headroom is fully utilized, subsequent additional costs will be charged to the income statement as they arise.

At the end of the year, the aggregate remaining cash balances in the trust and the qualified settlement funds was $6.6 billion, with $20 billion paid in and $13.4 billion paid out and as indicated in previous quarters, we continue to believe that BP was not grossly negligent and have taken the charge against income on that basis.

Turning now to divestments, in 2013, we completed our $38 billion divestment program and the sale of our share of TNK-BP to Rosneft for $27.5 billion. We continue to actively manage our portfolio and in October announced plans to divest a further $10 billion of assets by the end of 2015. So far we have signed deals worth over $3 billion against this commitment. This includes the recently announced sale of a package of asset in the Alaskan North Slope for $1.25 billion.

Now, this slide compares our sources and uses of cash in the first quarter of 2013 and 2014. Operating cash flow was $8.2 billion in the first quarter of 2014 compared to $4 billion a year ago. Excluding oil spill related outgoings, underlying cash flow was $8.9 billion compared to $4.5 billion a year ago. In both cases the increase is largely due to the continued robust cash delivery from our businesses and the absence of the building of working capital reported in the first quarter of 2013.

Our organic capital expenditure in the first quarter was $5.4 billion. Inorganic capital expenditure in the quarter was $680 million and included the purchase of additional equity in Shah Deniz and the South Caucasus pipelines in Azerbaijan. We received divestment proceeds of $1 billion during the first quarter and $2 billion of shares were also repurchased in the quarter.

At the end of the first quarter, net debt was $25.3 billion with gearing at 16.2%. As previously stated our intention remains to keep gearing at a target band of 10% to 20% while uncertainties remain. As already noted, today we announced an increase in our quarterly dividend to $0.0975 per ordinary share, 8.3% higher than a year ago.

This reflects our confidence in our ability to grow sustainable free cash over the medium to longer term and the delivery of the 10 point plan. As previously announced the board will continue to review the dividend with the first and third quarter results each year. Since the 1st of January this year, we have bought back $2.1 billion of our own shares bringing the cumulative total since early 2013 to $7.6 billion. Our $8 billion share buyback program from the proceeds of the sale of our interest in TNK-BP is now approaching completion.

We intend to use the post-tax proceeds from our current $10 billion divestment program predominately for shareholder distributions with a bias to share buybacks. This will support beyond the current program.

Looking further out to 2018 and the financial outlook we shared with you in March. We remain confident of delivering operating cash flow of $30 billion to $31 billion in 2014 at a $100 barrel and increase more than 50% over 2011. Relative to 2013, this reflects the higher expected contribution from major projects in the upstream, the continuing ramp-up of the Whiting Refinery and some reserve of the working capital bill seen in 2012 and 2013.

In 2015, we expect operating cash flow to be broadly similar to 2014 before then growing out to 2018. We also intend to keep capital expenditure in a range of $24 billion to $26 billion per annum over the same period. This will provide the platform for us to continue to grow shareholder distributions, firstly by growing dividend per share progressively in accordance with expected growth in sustainable underlying operating cash flow, secondly we will then look to buy us surplus cash over and over capital requirements and dividend payments to further distributions through buybacks or other mechanisms.

Now, let me hand you back to Bob.

Bob Dudley

Thank you, Brian. Next, let me give you a brief update on the status of certain Gulf of Mexico related legal proceedings in the United States. As you probably know, the first and second phases of the MDL 2179 trial in New Orleans are now complete with the court yet to rule on either. The penalty phase in which the court will hear evidence regarding the penalty factors set out in the Clean Water Act has been scheduled to begin on January 20th next year. Separately, BP continues to contest the payment of business economic loss claims which we believe to be unfounded.

Last month, the Fifth Circuit denied BP’s request for a permanent injunction to prevent the payment of business economic loss claims not traceable to the oil spill. We disagree with this decision and have requested an en banc hearing review by all of the active Fifth Circuit judges. We’ve also asked the court to consider this petition at the same as it considers our petition in the appeal related to the final approvement of the settlement.

Importantly, the court issued a fair and reasonable ruling regarding the matching of revenues and expenses in calculating business economic loss claims, and a new

Matching policy has been submitted to the District Court for approval. BP has indicated its support for the policy, while the Plaintiffs’ Steering Committee have objected. In the meantime, the temporary stay of all business economic loss claim payments remains in place until the Appellate Court issues its mandate.

Also last month, BP entered into an administrative agreement with the United States Environmental Protection Agency, on behalf of the federal government, resolving all matters related to the suspension, debarment and statutory disqualification of BP following the Deepwater Horizon accident and oil spill. As a result of this agreement, BP is once again eligible to enter into contracts with the US government including new deep water drilling leases in the Gulf of Mexico and fuel supply contracts. And I’ll come back to this in a moment.

We are determined to pursue fair outcomes in all legal proceedings for our millions of large and small shareholders. We continue to compartmentalize the management of these activities to avoid distraction and BP’s operating teams remain firmly focused on delivering our business objectives.

Turning to the upstream we announced last week a deal to sell interest in a number of our Alaskan assets to Hilcorp for $1.25 billion plus a development carry for the liberty field of up to $250 million. This deal will concentrate our operating footprint and we expect it to drive higher activity into the basin. This enables us to focus more intensely on maximizing production from Prudhoe Bay, North America’s largest oil field as well as progressing the Alaska LNG opportunity.

In exploration following last year’s success, we intend to complete at least 15 exploration wells in 2014, eight wells have already been completed, resulting in two new discoveries at Orca in Angola, and Notus in Egypt. Both of these wells were tests of newly acquired acreage and give us further encouragement in the plays we are testing.

We continue to access new acreage as our recent result in the Gulf of Mexico lease sale shows, BP was the highest bidder on 24 out of 31 blocks with final award subject to regulatory approval, this was made possible by the lifting of BP’s debarment by the US EPA in March and demonstrates our continued commitment to the Gulf of Mexico.

Turning to projects, the first quarter of 2014 saw three major project startups. Na Kika Phase 3 and Mars B in the Gulf of Mexico, and the Chirag oil project in Azerbaijan, and I’m pleased to say that the Atlantis North expansion Phase 2 project in the Gulf of Mexico, started up earlier this month. This milestone represents the first of our four new production wells in this development.

We continue to make progress on three further startups planned for 2014. In Angola, the CLOV FPSO is now moored on site with hook up, well cleanup and other pre commissioning activities now in progress. In the North Sea, the Kinnoull project offshore construction and commissioning ramp up are on track.

And finally in Canada all wells have been drilled on the Sunrise Phase 1 oil sands project. The wells’ facilities are also complete and construction of the central processing facilities is in progress.

In our operations we have started our 2014 turnaround program with our first in Angola completed ahead of schedule. The majority of seasonal turnaround activities will occur in the second and third quarters. Having invested heavily over the past few years, our 2014 program represents a lower level of activity compared to prior years. We continue to see an improvement in our operations with first quarter BP operated plant efficiency more than 1% higher than the 2013 average. This is driven by our investment in maintenance and reliability as well as the benefits being delivered by our functional organizational model.

Finally in our global wells organization, we expect to deliver our highest operated production from new wells and well work for four years. Our top 15 wells for 2014 will deliver two thirds of total new well production this year. 45% of these wells have come online in the first quarter.

With regard to Russia, let me first update you on some organizational changes. We recently announced the appointment of David Campbell as BP’s new Head of Russia, based in Moscow and reporting directly to myself. David brings 30 years of commercial experience, technical and operational leadership roles across a wide range of locations, including the Alaskan Arctic, the North Sea, Mexico and Iraq as well as within TNKVP. This move combines the Head of Russia and regional president roles simplifying and focusing how we manage our unique position in Russia.

Turning to Rosneft’s progress during the quarter, recent events have created some volatility in the Russian financial markets and as you have seen, the weaker ruble has affected current quarter earnings. However Rosneft continues to make strong progress. In the quarter this included an asset sale of over $1 billion to Sabor with whom Rosneft also concluded a significant long term associated. Rosneft are also focusing on improvements in the efficiency of their operations and also continue to progress the execution of their major projects and their on-going refinery, modernization program. Our commitment to Rosneft is a long term one. Our relationship continues to grow and we believe that it will have significant benefits for both Rosneft and BP.

In the downstream the quality of our portfolio continues to improve and we are maintaining focus on safe reliable operations. That’s reflected in our high Solomon availability which remains strong at 95% in the first quarter.

This quarter, we continue to increase heavy crude processing at the Whiting Refinery. Throughput reached about 200,000 barrels per day at the end of March and in April has achieved over 210,000 barrels per day. And Whiting is expected to reach heavy throughput of 280,000 barrels per day during the second quarter. We continue to focus on the overall quality of our downstream portfolio having announced earlier this month that we will be ceasing refining operations at the Bulwer Island refinery in Australia by mid-2015. This has been driven by commercial pressures experienced by small scale refineries in the region.

In petrochemicals we acquire the remaining 50% joint venture interest in our PTA plant in Indonesia as we consolidate our footprint around advantage locations.

And in lubricants we’ve launched the new product, Castrol EDGE which is boosted with TITANIUM Fluid strength technology which is a unique polymer and continues our strategic focus on technology and quality lubricants to further develop our premium brands.

So let me now sum things up. The BP proposition now to 2018 is to deliver value for shareholders in a form of sustainable growth and free cash flow in support of growing distributions. We planned to do this through material growth in operating cash flow, coupled with strong capital discipline. I think we can now fairly claim to be a company that is achieving real business momentum and turning words into action. Specifically as you can see, we are actively managing our portfolio, both unlocking value today and allowing us to focus on value over volume into the future. Our recent announcement to divest a package of assets in Alaska is a good example of this.

In exploration we have participated in two new discoveries in eight exploration wells year to date. Also in the upstream we’ve already started our four major projects this year, all in high margin areas. And in the downstream the upgraded widening refineries ramping up steadily, this is all helping us stay at course, towards material growth and operating cash flow. At the same time we are maintaining capital discipline and intent to stay strictly within the limits we’re set ourselves.

So I am confident we are making strong progress and you can see this reflected in the dividend increase we’ve announced today. So thank you for listening. And now we will be happy to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions).

Jessica Mitchell

Welcome all to the Q&A session. It’s Jess speaking again and we will take the first question today from Jason Gammel from Jefferies. Go ahead Jason.

Jason Gammel - Jefferies

Thanks very much. And thank you for the update on the situation with Rosneft. I am really just -- it hasn’t been a large amount of time since incremental sanctions were imposed on the recession, would you be able to provide your understanding of how this potentially restricts your participation, with natural results of Rosneft or indeed in participating in any board meetings or board decisions?

Bob Dudley

Jason, yes. Hi, thanks. Well, a couple of things, you’re right it’s only been about 24 hours. We will of course comply with any of the relevant sanctions and we’ll monitor the situation very closely. Rosneft itself has not been sanctioned, so we will continue to work and whatever the appropriate manner is with Rosneft primarily as a shareholder but also as a partner and of course BP is not alone in being a big energy investor in Russia and a partner of Rosneft.

We, Jason we are committed to our investment in Rosneft, we intend to remain a successful long term investor in Russia. Yes. I will be able to continue to participate on the Board of Directors of Rosneft itself. And I think and see what can I add to that from your questions, we will be able to exercise our shareholder both at the Rosneft AGM and maybe Brian, maybe if you’re, Jason if you could comment on the accounting impact?

Brian Gilvary

Yes, Jason in terms of -- of your question participating in their earnings, nothing has changed in the last 24 hours. In terms of the accounting standards, in terms of equity accounting as a starting point, equity accounting starts on the assumption that you're somewhere north of 15% we have something close to 20% but the accounting standard also requires, an evidence in any one of five ways either through representation on the board of directors which we clearly we have through Bob, participation in policy making processes through that board seat, interchange of managerial personnel, provision of essential technical information or any material transactions in the two parties. I think we’ve ticked four of those five boxes in terms of equity accounting and we review that on a quarterly basis to the audit committee and nothing has changed in the last 24 hours that would affect that.

Jason Gammel - Jefferies

Okay appreciate the comments. I know there is a lot of uncertainties still around the whole situation.

Bob Dudley

Yes and we will of course comply with all the relevant sanctions and we’re just going to continue to monitor it. Thanks Jason.

Jessica Mitchell

Okay, thank you. Next question from Irene Himona at SocGen.

Irene Himona - SocGen

I had a couple of questions please. So firstly, you had spoken last year I think about a potential reversal of the large negative working capital that we had seen in 2013 and it wasn’t in Q1, can we still expect that reversal over the rest of this year and next year? Secondly, Bob, you mentioned Angola, I wonder if you could briefly update us on the presold drilling plans for this year? Thank you.

Brian Gilvary

So Irene, I’ll just pick up the first quarter. You’ve clearly looked very closely at the balance sheet. We saw a release of around $400 million of working capital in the first quarter result. That’s typically a quarter where quite often you may see a build but there are no operational issues in terms of that would drive that. So there has been a modest release of about $400 million this quarter, nothing has changed from what we’ve said previously, I think at the end of 3Q that we expected roughly two-thirds of the 5 billion to release and unwind itself through this year. All things being equal and nothing changing in terms of pricings of course, pricing would have an effect, but you’re right, it’s a relatively modest release in 1Q, we expect to see some more of that release as the year progresses.

Bob Dudley

Irene, on Angola, it’s actually been a pretty good period here in terms of drilling. We are evaluating what we think is a breakthrough discovery made offshore Angola and the pre-salt which is that for those of you that layer that lies beneath that, there is big thick layers of salt, it’s operated by Cobalt. The first well was Elantra number 1, which is on block 20 and then Cobalt announced discovery on a well called Orca in the deepwater pre-salt also on block 20. That one estimated resources appeared to be between 400 million and 700 million barrels of large light oil structure but we’re going to continue to test that Orca further.

And then we’ve got additional wells that will be drilled this year and I'm just flipping through to look and see which well, we've got a well that we'll be drilling, yes, so I have a note here that says we shouldn’t really talk about the exact wells but we’re going to have a well that has a name and it’s I think we’re going to be spotting that well on block 19. And then Cobalt of sales will begin to drill an appraisal well as well in block 20. That’s probably all I should say right now but we’re very enthused about the region.

Jessica Mitchell

Thank you. All right, so the next question then, we’ll move over to the U.S., Doug Terreson from ISI. Are you there Doug?

Doug Terreson - ISI

I am. Good morning everybody. In E&P production has been pretty resilient on a comparable basis and it seems that profitability is likely to be resilient too given the growth from the higher margin start-ups that were highlighted and released today. So my question is whether besides the seasonal turnarounds and the loss of Abu Dhabi that Brian mentioned, are there any other major mix effects that are going to affect the E&P profitability in 2014 and should this be a year of higher profitability and E&P for the company?

Bob Dudley

Yes, Doug, it is. There is nothing major that’s going to throw that, we’ve got -- we’ve started up four projects this year, we’ve got three more to start up as I mentioned earlier. You’re right, the turnarounds which have gone -- I think in 2011, we did 47 turnarounds and then in ’12 we did 30 and in ’13 we did 20, this year we’re down to 10. So you will see that drop and turnarounds of which four will be in the second quarter and four will be in the third quarter. But there is nothing that I can look at that would see a major change, underlying production should grow as these new projects come on most certainly. So year-on-year underlying there will be some growth in 2014.

Doug Terreson - ISI

And also Bob a few minutes ago, you spent a minute on the BEL settlement where I think you mentioned that payments are on hold and appropriately so in my opinion, but because of figures associated with this item or so meaningful. My question is what outcomes will need to unfold to trigger a change in the provision in this area remaining, is the recent decision that you indicated the PSC disagree likely to represent some type of binding judgment necessary or could this portion also face an extended legal path and so just any colour on this process in this area which is pretty meaningful would be appreciated?

Bob Dudley

Yes, Doug. There is a lot of moving pieces of this and Brian sat down earlier with our legal team.

Brian Gilvary

Yes maybe just Doug on the specifics of the matching policy which is still sitting with -- the judge is being recommended forward by the fund in terms of how the new matching policy should now be enforced post the Fifth Circuit ruling. We'll have to wait for that to effectively come into force. And then once that in force and in action, and we get a period of time of where we start to see new determinations and indeed no doubt the revision of all the determinations inside the fund. And we get some flow in terms of understanding what sort of claims that are being processed. Then after a period of time we’ll try and come back and do so some sort of actuarial calculations, but right now it’s indeterminable. And on that basis we will simply take provisions as they arise in each quarter. And as you say effectively that -- those payments will be suspended for 12 months -- over 12 months, we will now wait until that -- until that determination comes through, sorry, over the last six months. We'll wait till that determination comes through, and then we will be able to try and do [indiscernible] ready will require some pattern of claims to enable the actuaries to do that.

Unidentified Analyst

Okay. Thanks for the clarification Brian.

Brian Gilvary

Yes, and Doug, I just want to say that while there is some things that we’ve less than satisfied about, I think the court’s ruling on the matching is fair and reasonable.

Doug Terreson - ISI

Rightly so unless [indiscernible].

Jessica Mitchell

Thank you. Next, in the U.K. Theepan Jothilingam from Nomura.

Theepan Jothilingam - Nomura

Yes. Thank you, Jess. Good afternoon. I just want to focus on the Gulf of Mexico, so it’s below 48, and perhaps firstly, could you sort of just update in terms of the trajectory in the Gulf. I know you told us about maintenance, but how does that compare to, sort of the increased activity levels with the number of rigs and the producer wells you’ve talked about? And could you discuss in that context Thunder Horse?

Then in terms of the new model in the last 48 and I know its early days since your announcement in March. But perhaps you could talk about what’s been implemented so far? What types of ENA activity you expect? And how much capital employed do you have in that business? Thank you.

Bob Dudley

Okay. A lot of questions there, Theepan. Thank you. Well, the Gulf of Mexico, we’ve got 11 rigs running now in the Gulf, four exploration, two appraisal wells. Production will continue to increase in 2014, fourth quarter production was up about seven over the third quarter of 2013. And we’re -- I won't give you the numbers today, but we are bringing on a series of new wells, we’re well over 200,000 barrels a day in the first quarter. And we’d expect to continue a trajectory out in time, 2018 or so out towards 300,000 barrels a day. We feel like we're on track for that. We’re going to have -- happening right now major project ramp up of Na Kika phase III, the shell operated Mars B project is ramping up as well. We had in middle of April, the Atlantis, North Atlantis phase 2 project start up the first of four wells, Thunder Horse and Atlantis we’ve got new wells coming on. The well worked delivery at Thunder Horse is happening. We will have two minor turnarounds in 2014 on Thunder Horse. And then later out 2015 to 2020 really the growth that we see in our hubs will be driven by Thunder Horse and Atlantis 2B. We still have only around 20% of the Gulf of Mexico resources around those four hubs that have been produced to date. So while the trajectory won’t be a straight (T-pan) [ph] is definitely on track for what we told you before.

Brian Gilvary

And then (T-pan) [ph] in terms of low 48, it’s a little premature at this point, since it was only a month ago that we announced it. But we have clearly in terms of Lamar and the team are in action round, what the new governance model looks like all of the various internal announcements what that means in terms of size in the organization are pretty well advanced.

What I would say in terms of first quarter, it was certainly, probably one of the strongest quarters we’ve seen in over three as you'd expect with the run off in gas prices in the United States. So both the strong earnings quarter for that business relative to the history and from operating cash flow delivery perspective. So I think it was a good quarter. But I think it’s a bit premature yet to talk about where we are, most certainly we'll have a lot more information at the second quarter around where Lamar's got to with the reorganization of that business.

Jessica Mitchell

The next question comes from Oswald Clint at Bernstein.

Oswald Clint - Bernstein

Thank you very much, Jess. Yes. Actually I had a question just around what Brian was talking about, I was curious on the lower 48 business if just looking at your, Henry Hub sensitivities, if that business was able to capture that type of sensitivity, I think it might have implied by $300 million of kind of [indiscernible] from the first quarter versus first quarter last year. I just want to get a sense of it, if it was able to capture that level of profitability.

And also just linking into that on the lower 48 business and given what happen to the -- to your assets in Utica, how confident or how good an asset do you think your Eagle Ford position is at this point? Thank you.

Brian Gilvary

So Oswald, the first question, yes, it has been a good quarter we’ve been able to capture, so notwithstanding the course to Utica write-offs sits in low 48 book. So, but there’s no question we were able to capture the upside in the gas prices to the first quarter and in terms of cash flow, for that quarter as well. So yes, is the answer to the first part? And Bob you want to answer about Eagle Ford?

Bob Dudley

Yes, the Eagle Ford is producing between, well just under 40,000 barrels a day oil equivalent of which 34% is liquid, so we like our Eagle Ford position, we like the relationship we have with our partner there where they do a lot of the surface operations we do a lot of subsurface work, Lewis, it’s actually been a very good model for us, so yes, happy with it.

Jess Mitchell

Thanks Oswald. Over in the US, Stephen Simko from Morningstar Research, go ahead Stephen.

Stephen Simko - Morningstar Research

Hi, good afternoon everybody, on the last question, related to the Eagle Ford and your opinion of that. I was wondering when you guys talked about the onshore reporting and changes that are going to happen with your lower 48 assets, you showed a map of your different gas acreage and I was wondering if and when the time comes for you to decide to deploy capital, a little bit more into that business going forward, how would you kind of stack up the plays and the producing assets that you have, or put another way, where would the first dry gas rigs be deployed to in that acreage, thanks.

Bob Dudley

Well part of your question has to do with scale of operations in the various areas so certainly places with scale like we have in San Juan produces high rates of production but it’s pretty dry gas, I think that obviously the first thing we’re interested in are liquids because that’s where most of the value is. But you know in our production areas of Wamsutter which have a reasonable amount of liquids as well, 40% liquids, we got three rigs running there, we don’t have that many rigs running in North America, but three in Wamsutter, we’ve got two running in the Haynesville which is only about 20% liquids, but we got to restructure that business and get the cost and then let the business itself look through the Wamsutter, the San Juan, Anadarko, Woodford, etc.

Jess Mitchell

Okay thank you, next question of Alejandro Demichelis at Exane, can you go ahead, Alejandro?

Alejandro Demichelis - Exane

Yes, thank you Jess, in coming back to the onshore business in the US and the write-down there you have made here on Utica, the rest of the acreage, are you still going to go through and analyze what you feel the fair value of those assets are and if that’s the case, when do think that that could happen?

And the second question is, in the overall group how do you see the cost evolving let’s say over the next 12 months?

Brian Gilvary

So Alejandro, if I maybe pick up the first part, in terms of Utica we’ve taken the write-off of the assets where we’ve made the appraisal wells, it’s premature to say what we’ll do with the remaining parts of that asset base, but I think we’ve made it very clear that we don’t intend to proceed with where we are today so that’s a really commercial information that we would normally recycle.

Bob Dudley

Yes, in terms of costs, I assume Alejandro you’re asking about upstream costs which are again different in different basins around the world but for the entire group. We are continuing to simplify, we’re seeing lower lifting across, really across all the regions, pretty much, we are reducing our seismic activity which will be part of our cost reduction as well, we’ve finished a lot of seismic, our total cash cost for the upstream, we expect it to be down about 1% from last year through this year mainly due to better efficiency and a lot of these reorganizations that we’ve been talking about.

Jess Mitchell

Right, the next question comes from Jon Rigby at UBS.

Jon Rigby - UBS

Hi, thanks Jess, if I just pick up on the comments you made on trading I think you a good trading quarter both in gas and in the downstream as well. And I remember a couple of years ago we were all worrying a little bit about the increasing competition with banks hiring large commodities et cetera and it seems to be a process of exit there, which I guess has implications for competition but also for liquidity in the market, and there’s obviously increased regulatory scrutiny, and I’m also sort of looking at the way your disposal program is going and I think some of the gas processing plants in the upstream and clearly refinery capacity in the downstream is changing. I wonder whether you can just indicate where you see in the sort of medium term looking back historically where trading earnings have gone, are they remaining consistent and could we expect or should we expect any changes in the contribution to the business going forward?

Brian Gilvary

Thanks Jon, so I think the way I captured is, there’s an awful lot of information you’ve put out there in terms of other questions, so you’ve sort of laid out the landscape of what we see our commodities in the energy space.

From BP’s perspective you have to remember the reason why we’re there in the first place is because we have big major flows of oil and gas and therefore that first rule of our trading business is to make sure they get balanced and ensure that our refineries get the best prices for their crude inputs and our upstream gets the best price for disposal of its production.

So that’s the kind of primacy of why we have the business and then of course it does at time to time take on positions, entrepreneurial positions that allow us to be able to benefit in the marketplace through positions that we have and of course this quarter's been a strong quarter. I think if you look at the volatility of the earnings over the last two or three years, lot of that has been driven by the volatility of the absolute price itself. And we don’t trade outright flat price. We tend to trade a commodity versus another commodity because we have a point of view on that. So I think what you’ve seen is there has been a lot of change in the space itself in terms of people entering and exiting the market.

We’ve seen a number of new entrants which is good for liquidity reasons but I think at the end of the day it’s been a strong quarter both in the oil and the gas space. Compared to the first quarter last year that was also a strong quarter, so the Delta 1Q, 1Q isn’t that large this quarter versus the same quarter last year because we also had a good set of results from the trading business there but it’s something we continue to investing going forward. And in terms of link get back to our asset positions, we can also of course replicate some of those through leasing our own storage which that business does in both oil and gas, so it doesn’t absolutely rely on having the own asset base in place.

Jon Rigby - UBS

And just as a follow-up. How does it rank in terms of a return on capital? I mean your unusual base and you look at return on capital I guess allow your competitors down, does it use up a lot of capital to put on trading position?

Brian Gilvary

No, Jon, see, you will know better than anybody that a return on capital is a kind of interesting measure, but it depends on the sort of nature of the business and how long you’ve been in the business and the sort of the continuity of that business. We have lots of portfolio changes inside it, but we look to ensure that it returns that we get from the business are accretive to the group. So we look at where the group is and normally given some of the risks so you’d normally look at a risk adjusted return typically in this space, you'll be wanting that to be significantly higher than the average returns for the group on a risk weighted basis.

Jess Mitchell

Thank, Jon. Now to Martijn Rats of Morgan Stanley.

Martijn Rats - Morgan Stanley

I had a question about UK operations. The 20-F over the last couple of years has shown -- but of course has quite a deterioration in volumes but also quite a sort of upswing in production cost per barrel. The last three years have gone from $12 to $21 to $25 and last year to $31 a barrel. And I counted there must something sort of underlying that I don’t quite capture, but I was wondering if you could comment a bit on where you see the UK operations going in terms of both volumes as well as production cost?

Brian Gilvary

Yes, Martijn, I’ll have a go with it but I can’t give you precise answer. But my good feel and will come back to you specifically would be that as reliability in the North Sea has been an issue for the whole industry over the last couple of years, clearly the denominator has been affected for everybody in the North Sea and that’s one of our biggest pieces that you’ll see this year and we’ve certainly seen the first quarter improvements in reliability in our operations those are one of the primacy of the things that we’re trying to do. But I would suspect that’s one of the biggest drivers of what you’ve seen in terms of costs and the number of turnarounds that we’ve had in place but of course our North Sea business has gone through a fairly major restructuring over the last two or three years, but maybe we’ll come back on a future call to give you something specific on that around the North Sea.

Martijn Rats - Morgan Stanley

If you -- given that, that for many seems to be going through a bit of sort of reflection point, is there any indication of like how much of the loss could be regained, that'd be very interesting.

Brian Gilvary

I think you’ll see some of that comeback as you start to see reliability improvement in North Sea for sure and that’s part of the future projections that we've laid out there around improving reliability and North Sea is certainly a part of that.

Martijn Rats - Morgan Stanley

Okay. Thank you.

Bob Dudley

And the [indiscernible] start-up that will be later this year.

Jess Mitchell

Thanks Martijn. Now, Ian Reid from BMO. Go ahead, Ian.

Ian Reid - BMO

Hi, thanks a lot. Just coming back from the Rosneft question Bob, if I can, I was wondering you’ve undoubtedly done some analysis of what might happen if Rosneft, the company itself is sanctioned. And I wonder what that means in terms of your interactions with them and is there any kind of worst case scenario where you’d be forced to actually dispose of the stake?

And second question is in the downstream, obviously a big increase in profitability in the U.S. I’m just wondering how much of that was purely due to Whiting versus your other assets there. Thanks a lot.

Bob Dudley

Yes, Ian, hi. I think projecting the price of oil is about as -- that’d be about as good as that as projecting sanctions. So I think trying to speculate on what would happen or could happen really isn’t helpful. As I’ve said before, we’ll respond appropriately to any sanctions abide by them, but speculating on worst cases is like projecting what happens at the price of oil falls to $10. I am not thinking that, that’s going to happen, go ahead.

Brian Gilvary

Yes, and on the second question around downstream first quarter versus the previous quarter, it’s obviously the recovery to somewhat recovery in refinery margins and a stronger trading results versus very poor low result that we had in the fourth quarter. 1Q versus 1Q there is certainly a benefit of Whiting since we took Whiting out of service, if you recall in the first quarter of last year, so Whiting coming back on stream this year versus last year been taken out of the service getting ready for the upgrade is certainly part of the first quarter versus first quarter results.

Ian Reid - BMO

You can’t quantify that a bit more, Brian?

Brian Gilvary

No.

Jess Mitchell

Okay. Thanks Ian. Next from Chris Coupland at Merrill’s, are you there?

Chris Coupland - Merrill Lynch

Hello there, thanks Jess, just a quick question on the operating cash flow recovery, I noticed that very little of that, whether it’s quarter on quarter or year on year has anything to do with what happened in the last quarter on working capital. I know you’re going to warn us not to annualize this number into the full year, but can you confirm that you see that trend continuing and maybe update us on what you found out in terms of the Whiting ramp up impacting the working capital for this year and second question more broad I guess just wanted to know whether you expect any additional, whether it’s political or regulatory headwinds following the headlines surrounding the Lake Michigan spill, thank you.

Brian Gilvary

So let me just take the first part of that question which is that we would expect, first of all, don’t take 8.2 and times it by four, clearly that would not be a sensible thing to do specially since we’ll see at the end of this year the mid lower tax $2 billion of flow out again so that is predictable every year around that sort of order of magnitude, but you can assume that there will be as I said earlier similar working capital release, but the biggest driver 4Q into 1Q from last quarter to this quarter is really around the underlying cash earnings coming from the businesses across the whole suite of different areas, slightly lower tax paid and some other lower payments. So I think the way I couch the first quarter is this is a good solid start for the year and there’ll be more to follow quarter by quarter.

Bob Dudley

Yes, Chris on Whiting for those -- back in March we had a process upset in one of our Whiting crude distillation units that resulted in a discharge of oil into the cooling water outfall into Lake Michigan. That clean-up was done immediately not only with brooms but vacuuming of the lake, manage collecting all that that reached the shore, the effort was not just managed by BP but with members of the US Coast Guard and the US EPA, the estimate to the EPA and the US Coast Guard was somewhere between 15 and 39 barrels of oil. The representatives were from the Coast Guard, they inspected they area first week of April and determined that there was no further clean-up work needed. There haven’t been any known impacts to wildlife or human health, and so the exact cause, we’re still investigating it, but there were no impacts to the refinery production or supply. So I think that that incident has been put aside.

Brian Gilvary

And sorry Chris you also asked about the working capital with Whiting that there is no major effect this year, I mean figuratively Whiting was down last year we had to go and purchase stocks, Whiting’s up we’re actually running crude so there is no major impact around that.

Jess Mitchell

We’ll take a question now from Lydia Rainforth at Bar Cap.

Lydia Rainforth - Bar Cap

Thanks Jess, and good afternoon, two questions if I could, firstly on the Mad Dog project, it was about a year ago that you said you didn’t want to continue with the projects that it was being developed, can you give us an update on where we are with that project now and where you’re looking to save money.

And then secondly if I could just ask a question to Brian on the downstream side and the charge that you took for the Bulwer refinery. I understand that that will be a triggering event but does it make you want to or have to go back to the rest of the refining assets that you have and want to look at [indiscernible] you’re carrying for those assets, thank you.

Brian Gilvary

Let me take the second one first, sorry Bob. The Bulwer one was I think we’re now down to about 12 operated refineries from [indiscernible] hit the if I think in my head about 12 that we’ve got left and having sold 13 over the last 13 years. So Bulwer’s a simple question of on the East Coast the over capacity refining there, we’ve looked to it from a commercial perspective, we’ve done various work and decided actually the best option for that refinery was effectively to close it down and convert it to an import terminal for jet fuel, but that doesn’t have any triggers anywhere else inside the portfolio. I’d actually say we’re pretty comfortable now with the refining portfolio we have. 2.5 refineries if you think about the Toledo joint venture in the northern tier of North America across from the West Coast through to the Midwest, and our position inside Europe with the German hinterland, Germany and the hinterland and our refinery in Castion, and a small part ownership of a South African refinery in [indiscernible] on the West Coast, that’s a pretty good advantage portfolio from our perspective so I don’t think this will lead to any other further triggers elsewhere inside the portfolio.

Bob Dudley

And with Mad Dog, you’re right, that’s one of the projects that we looked at and said just wasn’t going to compete, wasn’t going to cross the hurdle rates for capital in the company and we took a complete white sheet of paper to it again and looked at the economics very creatively and the development concepts was for phase 2, we did step back with our partners. It’s a spar today whether with us having just over 60% of partners of Chevron and BHP, and we all agreed to stop, look at it again, we’ve been actively engineering it and our teams I think are coming up, and looking at some very-very good options so we’re going to continue to review that at the right point, we’ll bring it forward as a project. I have no doubt that there’s a good economic project there and I’m very pleased that we stopped when we did to look at it again and we’re doing that of course with all our projects around the world.

Jessica Mitchell

And now Lucas Herrmann from Deutsche.

Lucas Herrmann - Deutsche Bank

Jess, thanks very much. Good afternoon gentlemen. Just two if I may. Firstly, Brian can you give us any idea what the cash flow seeded from or the free cash flow I should say seeded from the divestments you’ve announced to-date is likely to be, i.e. from the 3 billion of divestment proceeds?

And secondly, it’s great to see the exploration success particularly last year, the (Hopper) [ph] looks, well, it looks to be improving all the time. But, clearly you can’t proceed with everything. Where are you in the context of realizing value, or trying to accelerate the realization of value from your exploration success and resource that sits there under, it may take you quite some time to monetize if at all. When do we start to see the realization of some of that development or exploration resource?

Brian Gilvary

So, on that first question Lucas, no specific guidance in terms of numbers but nothing like as cash accretive as the $5 billion that was a free cash flow that was sold off -- sorry, of operating cash flow that was sold off as part of a $38 billion program, but we’re talking hundreds and millions of dollars not in the billions in terms of the 3 billion that's being done so far, it’s a real mix of different assets and if you recall what we said about the next tranche, the 10 billion over and above the 38, that some of that will be early life not cash accretive assets. So, you’ll start to see some of those probably appear in the portfolio of divestments going forward. So it’s in the hundreds of millions, not in the billions.

Bob Dudley

And Lucas on the exploration, you’re right, we’re sort of now moving into the heartland of the acreage that we have sort of picked up at the new basins over the last several years and still working our way through some of the earlier exploration obligations, we’ve had some good success. We have discussions often to -- we will be participating in 15 to 20 wells this year, we have discussions often with various companies about the potential of them joining us, some of its farming down, some of its farming in or carries that, in terms of where they are, I think you probably best to look at where we have 100% positions. But, I think we’ll just constantly optimize this. I think this is going to be a great source of value for the company.

Lucas Herrmann - Deutsche Bank

Okay. So what’s the space and effects?

Brian Gilvary

Yes.

Lucas Herrmann - Deutsche Bank

And can I ask one final or one third a question? Just going back to Martin’s question, North Sea and specifically the U.K. what is -- where is up time relative to capacity at the present time and one’s impression looking at the numbers is as Martin alluded to and I know it's true of the industry but it seems very true of yourselves, is the production relative to -- potential has been, should we just say very modest over at least the last three or so quarters if not beyond?

Bob Dudley

Well, you’re absolutely right. I mean, this has been an issue that the North Sea and the operators talk about and the contractors talk about uptime, it’s not a whole lot above 50% not only for the entire industry and we’re in that pack as well. We’ve got some turnarounds this year, I fully expect us to move out of that going forward, part of the issue is as turnarounds come around in the industry, the facilities have been built don’t have enough bed space for people to get out there to do some of the maintenance which effects some of this uptime and it’s part of a characteristic of a late life oil and gas province. But I think we are moving through this with our turnarounds and we’ll have -- (Shaleian) [ph] will be reworked, Kinnoull will come on stream. I can just tell you this is an area that we spend a lot of time on and a lot of focus on, along with the other operators and partner on. It's an issue in the U.K.

Jessica Mitchell

Okay. Thank you. And we’ll now -- we’ve got Jason Kenny on the web with a question. And his question is -- you have mentioned $1 billion increase for DD&A between 2013 and 2014 at the group level. Will there be a larger DD&A figure again in 2015? Can you give us an expected delta or trajectory for DD&A in 2015 over 2014?

Brian Gilvary

And Jason, I can imagine your thoughts, it sounds reciting that had you been on a phone from Edinburgh. But I’ll take it as a web one which is new I think for you. I think what we said back in March was we’ve seen a ramp up in DD&A as we've looked at investing in some of these high margin areas, one example is Angola where you have higher DD&A, the higher margins that come with it. But as we now start to get to more stable level of investment going forward in the upstream with the new projects that we have coming on stream, I think we’ve already flagged in March, that we wouldn’t expect to see a similar sort of ramp up into the future that we will start to see some of the DD&A stabilize out from where we are now. But the biggest drivers of that have been the investments, the higher capital gains as higher margin investments that return with them higher cash as well.

Jessica Mitchell

Okay. Thank you, Brian.

Brian Gilvary

The great thing about an internet question is that you don’t get a comeback from Jason unless he's very, very fast on the keys.

Jessica Mitchell

So, back to the telephone lines. And we have Thomas Adolf from Credit Suisse. Are you there Thomas?

Thomas Adolf - Credit Suisse

Yes, thanks. Two questions please. Firstly, on FIDs. I think on the last call you said you expect to take FID on five projects in 2014 and one of them in -- and I’m assuming this is the Tango expansion. I wondered whether you’re confident on the progress you’re making there in particular related to firming up the DMO, at the time there is a bit of turmoil at the SKK Migas and we are also in a presidential elections there.

And then one more question, just small one, you said you made a discovery or notice, it’s an HPHT well. I wondered whether this is in excess of 15 kpsi?

And just a final one on Brazil, it’s about Itaipu and Wahoo discovery, it’s been slow, we haven’t heard anything what’s going on? Thank you.

Bob Dudley

Great, Thomas. Thank you. Well, you’re right we’ve made very good progress on the Tango expansion particularly with signing the gas contracts. So I think we’re getting the conditions in place for that project on FID. I think we said five in the past, I’m not sure that, that one will be done this year, it maybe. So I would say, there is going to be one in India, one in Angola, Australia and maybe a Thunder Horse south expansion as four FIDs, it’s sort of way I’m thinking right now. But we’ll see it's possible, we actually really like that Tango expansion. I am very pleased about the gas agreement.

On the Notus well, you’re right, it is the deepest well drilled in Egypt. We farmed in to it during the drilling with BG as the operator. It’s down. It looks very promising. I think it's significant. We think it certainly can be developed. So it’s a feasible reservoir in terms of temperature and pressure. And we’re still evaluating the results, so the operator is and we’re contributing it. So it’s probably best to speak directly with BG about that.

We -- about Itaipu, it is located in the deepwater of the Campos, in Brazil, we have completed three wells on it. We’ve got an on-going evaluation that’s right near another development that appears to be part of a Petrobras area as well, and Wahoo we’re continuing to evaluate that. What I would expect down the road here is that there will be some sort of economic unitization of that area with some of the activities of Petrobras and we’re still evaluating and looking at it. And as everyone knows unitization and knowing how much is on one side of the line versus another is going to take a little bit of awhile and we can’t really comment on it.

Thomas Adolf - Credit Suisse

Okay, thanks. Can I just quickly go back to Tango again? Can I just clarify that you’ve firmed up the DMOs, and if so, what -- how much of the volumes do you need to sell to domestic market? I was under the impression that’s the uncertainty still.

Bob Dudley

Well on that, I think we’ve made commitments of 40% into the domestic market. I think we’ve got sort of all but one of the gas contracts in place and I don’t -- because those discussions are going on I probably shouldn’t comment on it further.

Jesse Mitchell

Great. Thank you, Thomas. A question now from Michele della Vigna of Goldman Sachs.

Michele della Vigna - Goldman Sachs

Good afternoon. Thank you for taking my question. You’ve now pretty much completed the $8 billion buyback and you did it at a rate of more or less $2 billion per quarter. I was thinking as you now enter the kind of second stage for the buyback whether we should expect it to be at its lower pace or perhaps it’d be more lumpy as you wait for the proceeds from disposals to come in before doing the buyback?

Brian Gilvary

Thanks, Michele. We haven’t really given any indication. All we’ve said so far is that we will look to you use the bulk of the $10 billion of post-tax proceeds predominately for shareholder distributions predominately buybacks. That’s really a commercial decision that we'll take internally in terms of as those cash proceeds arrive, it sits within the financial frame, it looks at how the capital flows out. But you should assume that we will attempt to try and keep the continuity of the buyback programs, so you don't see a sudden stop to it. So that’s why you’re seeing its phased down more recently. And we’ll also look at around of the general environmental outlook in the marketplace as to how we go ahead and reduce that equity base. I mean the basic premise is that we’ve shrunk our equity in terms of the amount of assets we’ve sold off and therefore it comments that we should be look to shrink the share base. So we’ll look to that and I think what we’ve said is over 2014 and 2015, you should expect to see that share base come down by a commensurate amount.

Jesse Mitchell

And we'll take a question next from Bertrand Hodee of Raymond James.

Bertrand Hodee - Raymond James

Yes, hello. I have two questions. First one is a follow-up on Bob’s comment in terms of upstream cash cost being down probably down 1% in ’14 compared to ’13, do you refer to total cash cost or unit cash cost because if it’s total cash cost down 1% I suppose that unit cash cost should be down more than 1% given that probably your underlying group prediction is going to be higher in '14 compared to '13.

And the second the second question is -- in Angola you are targeting one FIG this year, so is it going to be block 31 or block 18?

Brian Gilvary

Bertrand, I'll take the first question on cash cost, it’s total costs and of course in term of unitary cash costs you’d also have to allow for the change around the Abu Dhabi concession in your volumes, the disposal proceeds, the disposal volume so it’s actually box balance question that we’ve not given that sort of level of disclosure, but in terms of total cash cost terms you should expect those to be down.

Bertrand Hodee - Raymond James

Can I follow-up on that, because Abu Dhabi was equity accounted, so I guess it does not include -- it’s just not included in the calculation now?

Brian Gilvary

No, well no, but -- well it depends how you do the calculation, but in terms of the volumes, the Abu Dhabi volumes would have been there last year for you to unitize. So, you would have carried those volumes inside the unitization. So all I'm saying is there’s a lot of moving parts, but on a total basis they will trend down.

Bertrand Hodee - Raymond James

Okay.

Bob Dudley

So, and Bertrand on your question about Angola, I am going to be a little cryptic and I am going to say it’s not block 18 or 31, but it’s a total project.

Jessica Mitchell

Thanks, Bertrand. And last but not least, Fred Lucas from JPMorgan.

Fred Lucas - JPMorgan

Thanks, Jess. The exploration for Angola is going very well but the performance of your L&G asset there is not -- could you just give us an update on what the problems are with that asset? I'd appreciate you don’t operate it.

And second question on gas prices in India, could you give an update on the situation there given the deferral to the gas price increase that was tabled? Thank you.

Bob Dudley

Yes, Fred. I think all the partners and the government of Angola have higher hopes for the L&G project there. We don’t operate it, but I mean I think this is going to be a constant, it has been a constant set of ironing out the cold end and the hot end of the L&G plant there. And that they continue to understand the engineering and get that plant going. We anticipate that this will be back on and up and running within the couple of quarters here. And I can’t really give you too much more of the details around what exactly, what exactly the engineering issue is there.

Fred Lucas - JPMorgan

So is that for a couple of quarters, is it Bob?

Bob Dudley

Well, it’s been -- it started up and then it was back down again and it’s -- I don’t know exactly what the current -- you should actually speak to the operator about what the date is, that’s always better to do than talking to partners. So, I think if I could refer you to the operator.

And then on India and we have not got large volumes included in our projections this year in terms of volumes from it. Now in terms of India, there was I think a positive step towards setting -- towards a market determined gas price estimated around $8 in Mcf that was to be adjusted quarterly, it has been deferred pending the outcome of the election in India which is the largest and longest democratic election in the world, 750 or 850 million people vote over a period of weeks which will be completed on the 16th of May.

And so the decision by the government was don’t change that price in the middle of the elections because it had a number of things, didn’t want to turn it into an issue that could become political. We do remain confident that the new gas price formula will be implemented. All indications are that it will be set retrospectively from the 1st of April 2014. I believe the Energy Minister has said the contracts that are being signed and gas volumes that gone out since April are being written and designed so that the price will retroactively be effective on the 1st of April. So those elections are going to go on, they're going to go on for another 2.5 weeks, so let’s just not interfere in anyway.

Fred Lucas - JPMorgan

Thank you, Bob. And if I may just slip in a third one, BG is looking for a new CEO. Do you have any interest in extending your agreement?

Brian Gilvary

I’ll answer that question on Bob’s behalf, we’re very happy with him as the CEO of BP. Thanks very much Fred, and that is really a matter for BG.

Bob Dudley

Yes. I have enough to do. Thank you.

Jessica Mitchell

Okay. Well, thank you everybody. It was good to have you on the call. I know it’s a busy week for you.

Bill Boyles

Yes. So, thank you everyone, I mean your questions as always are very good and broad, some of them detailed and some of them very big picture. You know I hope what we are showing you is we are pursuing and have been pursuing the value over volume point. The objective, continue to grow, sustainable free cash flow, continue on the operating cash flow targets we have this year so that we can continue to grow distributions to the shareholder, you'll see us continue to actively manage the portfolio. Have the discipline on our capital spending. And I think the team is doing a very good job of executing safely and reliably and our efficiency has really come up since 2011. So, thank you all very much for your attention today.

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