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BP P.L.C. (NYSE:BP)

Q2 2014 Earnings Conference Call

July 29, 2014 9:00 am ET

Executives

Bob Dudley – Group Chief Executive Officer

Brian Gilvary – Group Chief Financial Officer

Jessica Mitchell – Head of Global Investor Relations

Analysts

Oswald Clint – Sanford Bernstein

Doug Terreson – ISI

Michele della Vigna – Goldman Sachs

Blake Fernandez – Howard Weil

Jon Rigby – UBS

Iain Armstrong – Brewin Dolphin

Guy Baber – Simmons & Co.

Theepan Jothilingam – Nomura

Anish Kapadia – Tudor Pickering Holt

Alastair Syme – Citibank

Lydia Rainforth – Bar Cap

Stephen Simko – Morningstar

Thomas Adolf – Credit Suisse

Bertrand Hodee – Raymond James

Gordon Gray – HSBC

Irene Himona – SocGen

Martijn Rats – Morgan Stanley

Chris Coupland – Bank of America Merrill Lynch

Fred Lucas – JPMorgan

Lucas Herrmann – Deutsche Bank

Richard Griffith – Canaccord Genuity

Neill Morton – Investec

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 Second 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. Hello everyone and wherever you are in the world, I’d like to thank you for joining us today. It’s been another active and, I think, a successful quarter at BP. We continue to move with momentum towards our key goals, not least our commitment to delivering the 10-point plan we first laid out to you in 2011. The demonstration of this is in the stronger underlying earnings and operating cash flow you are seeing in our results today compared to a year ago. We continue to ramp up the new major projects that drive delivery of the $30 billion to $31 billion of operating cash flow planned for this year, so we remain confident of achieving this goal. At the same time, we are firmly focused on safe, reliable and increasing efficient operations.

Earlier this year, we also set out our longer term proposition covering the period out to 2018. As you will recall, we said that we intend to grow sustainable free cash flow through a combination of material growth and operating cash flow and capital discipline with the intention of growing distributions to shareholders. Today you will also see the consistent progress towards the milestones that support the delivery of this plan.

Turning to today’s agenda, I will start off with the headlines for the group in the first half and then Brian will take us through the results for the second quarter along with a reminder of our financial framework and guidance. I will then give a brief update on the ongoing legal proceedings in the U.S. before a note on Rosneft and a look in more detail at the first half highlights from our upstream and downstream businesses. Finally, there will be time at the end for questions.

Let me start with an overview of progress in the first half of 2014, beginning with the portfolio. Having completed the $38 billion divestment program in 2013, we announced a further $10 billion of divestments by the end of 2015 and we have now agreed $3.4 billion of this $10 billion program and continue to look at other ways of actively managing our portfolio to generate value.

You saw this in the announcement we made in March regarding the separation of our U.S. Lower 48 business, and we have already made a start on defining an operating model for the new business and are busy transitioning to a new streamlined organizational structure. We have also signed a lease on new office premises in Houston for the Lower 48 business.

In the upstream, we have participated in the completion of 10 exploration wells this year with two significant discoveries, one at Orca in Angola and the other at Notus in Egypt. Five new upstream major projects have come online it the first half of the year, all in key regions for us. At the same time, we have a number of big projects ramping up, helping to drive operating cash flow growth in 2014 and beyond. We also continue to demonstrate quality in our operations as seen through our increased levels of plant reliability.

In the downstream, the modernized Whiting refinery is up and running heavy crude, and we have continued to focus the portfolio on advantage assets and high-quality products in growth markets. BP has also signed some important deals in the second quarter, notably a heads of agreement with CNOOC, the Chinese National Offshore Oil Corporation, for a 20-year LNG supply contract, so progress is visible and all of this supports our longer-term commitment to growing distributions.

In April, we announced an 8.3% year-on-year increase in the quarterly dividend, demonstrating our confidence to keep this momentum through the remainder of the year and beyond. We have also, as promised, bought back $8 billion worth of our own shares since the start of 2013, completing the buybacks associated with the proceeds from the sale of our interest in TNK-BP. The buyback program will continue, as Brian will come to later, supported by the current program of divestments.

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

Brian Gilvary

Thanks Bob. BP’s underlying replacement cost profit in the second quarter was $3.6 billion, up 34% on the same period a year ago and 13% higher than the first quarter of 2014. Compared to a year ago, the result reflects increased upstream production in higher-margin areas, a stronger contribution from Rosneft, the return and ramp-up of the modernised Whiting refinery, and stronger oil and gas realisations. These effects were partly offset by higher DD&A, a significantly weaker downstream environment, a lower contribution from supply and trading, and the impact of divestments. Second quarter operating cash flow was $7.9 billion.

Turning to the highlights at a segment level, in the upstream the underlying second quarter replacement cost profit before interest and tax of $4.7 billion compares with $4.3 billion a year ago and $4.4 billion in the first quarter of 2014. Compared to the second quarter of 2013, the result reflects increased production in higher-margin areas, primarily the Gulf of Mexico, and higher liquids and gas realisations partly offset by higher DD&A and well work costs and the impact of divestments. Excluding Russia, second quarter reported production versus a year ago was 6% lower primarily due to the Abu Dhabi onshore concession expiry in January and the impact of divestments. After adjusting for these factors and entitlement impacts, underlying production increased by 3.1%.

Compared to the first quarter, the result reflects increased production in higher-margin areas and lower exploration write-offs partly offset by a lower gas marketing and trading result following strong first quarter performance and lower gas realisations. Looking ahead, we expect third quarter 2014 reported production to be lower than the second quarter, primarily reflecting planned major turnaround and seasonal maintenance activities in Alaska and the Gulf of Mexico. We expect the seasonal reduction to be slightly larger than we experienced in the same quarter of 2013 due to phasing of these activities.

BP’s share of Rosneft underlying net income was $1 billion in the second quarter compared to $220 million a year ago and $270 million in the first quarter. The second quarter result benefited primarily from foreign exchange impacts. BP’s share of Rosneft production for the second quarter was 988,000 barrels of oil equivalent per day, an increase of 5% compared with a year ago. On June 27, Rosneft’s annual shareholders meeting approved an annual dividend of 12.85 roubles per share in respect of 2013 earnings. On the July 22, we received our share of this dividend which amounted to $690 million net of taxes.

In the downstream, the second quarter underlying replacement cost profit before interest and tax was $730 million compared with $1.2 billion a year ago and $1 billion in the first quarter. The fuels business reported an underlying replacement cost profit before interest and tax of $520 million in the second quarter, compared with $850 million in the same quarter last year. The decrease reflects a significantly weaker refining environment and a weaker contribution from supply and trading partly offset by significantly higher throughput and processing of heavy crude at Whiting from both the new units, which are now onstream, and the absence of last year’s planned outage for most of the second quarter.

The lubricants business reported an underlying replacement cost profit before interest and tax of $310 million compared with $370 million in the same quarter last year. The decrease was mainly due to the impact of restructuring programs and foreign exchange effects.

The petrochemicals business reported an underlying replacement cost loss of $100 million in the second quarter of 2014 compared to a loss of $20 million in the same period last year. The decrease was mainly due to oversupply in the aromatics market. Looking to the third quarter, in the fuels business we expect stronger margin capture relative to the second quarter driven by a lower level of turnarounds and Whiting operations. In the petrochemicals business, the challenging environment is expected to continue but we should benefit from a lower level of turnarounds in that business.

In other business and corporate, we reported a pre-tax underlying replacement cost charge of $440 million for the second quarter, in line with guidance, and the underlying effective tax rate for the second quarter was 33%.

The charge for the Gulf of Mexico oil spill was $260 million in the second quarter, primarily reflecting an increase in the provision for future litigation relating to the spill. The total cumulative pre-tax charge for the incident to date is now $43 billion. The charge does not include any provision for future 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 for business economic loss claims. We will revisit this each quarter, as we continue to contest what we consider to be unreasonable claims, a process which could take some time.

The pre-tax cash outflow on costs related to the oil spill for the second quarter was $170 million. The cumulative amount estimated to be paid from the trust fund was $19.3 billion, leaving unallocated headroom available for further expenditures of around $700 million. In the event that the headroom is fully utilised, subsequent additional costs will be charged to the income statement as they arise.

At the end of the quarter, the aggregate remaining cash balances in the trust and qualified settlement funds was $6.3 billion, with $20 billion paid in and $13.7 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 to divestments, as Bob noted, following the completion of our $38 billion divestment program and the sale of our share of TNK-BP to Rosneft in 2013, we continue to actively manage the portfolio. In October we announced plans to divest a further $10 billion of assets by the end of 2015. We have signed deals worth around $400 million during the second quarter, bringing the total agreed against this $10 billion commitment to $3.4 billion. Most notably this includes the sale of a package of assets on the Alaskan north slope, the farm-out of 40% of our interest in the Oman-Khazzan project, and the sale of our Texas Hugoton and Panhandle West gas assets to Pantera Energy.

Moving now to cash flow, this slide compares our sources and uses of cash in the first half of 2014 to the same period a year ago. Operating cash flow in the first half was $16.1 billion, of which $7.9 billion was generated in the second quarter. Excluding oil spill related outgoings, the first half underlying cash flow of $17 billion was $6.8 billion higher than a year ago. Organic capital expenditure was $11 billion in the first half and $5.6 billion in the second quarter. We received divestment proceeds of $1.8 billion in the first half of 2014, including $800 million in the second quarter, and in the first half of the year we have bought back $2.4 billion of shares, including $500 million in the second quarter.

Net debt at the end of the second quarter was $24.4 billion with gearing of 15.5% compared to 12.3% a year ago. This largely reflects the impact of our share buyback program over the course of the year. Our intention remains to keep gearing in a target band of 10 to 20% while uncertainties remain.

Our guidance for the full year remains unchanged, as outlined to you in February. We expect full year underlying production to grow compared to 2013 after adjusting for the impacts of the Abu Dhabi onshore concession expiry and divestments. This increase is mainly driven by the start-up of major projects. As mentioned, organic capital expenditure in the first half of 2014 was $11 billion and we expect the full year to be around $24 billion to $25 billion. DD&A for the first half of 2014 was $7.3 billion and we expect the full year figure to be around $1 billion higher than 2013. Other business and corporate charges are expected to average $400 million to $500 million per quarter and we continue to expect the full year effective tax rate to be around 35%.

Looking at shareholder distributions, in April we increased the quarterly dividend by 8.3% year-on-year, reflecting our confidence in the delivery of the 10-point plan and growth in operating cash flow over the medium term. The Board will review the dividend again with the third quarter results. Since January 1 this year, we have bought back $2.6 billion of shares, bringing the cumulative total since early 2013 to $8 billion. This concludes our $8 billion buyback program from the proceeds of the sale of our interest in TNK-BP. We intend to use the post-tax proceeds from our current $10 billion divestment program predominantly for shareholder distributions with a bias to share buybacks.

Looking further out to 2018 and to remind you of the outlook we shared with you in March, we remain confident of delivering operating cash flow of $30 billion to $31 billion in 2014. Our first half operating cash delivery of $16.1 billion puts us well on track for the year. Relative to 2013, this reflects the higher expected contribution from major projects in the upstream, the ramp-up of the Whiting refinery, and some reversal of the working capital builds seen in 2012 and 2013. We expect to sustain this significant increase in operating cash flow in 2015 at broadly similar levels to 2014, and then to see steady growth out to 2018.

Growth is driven by the higher cash generating characteristics of our portfolio going forward, both upstream and downstream, as well as by the opportunity to improve efficiency across the group. In the near term, we expect underlying cash costs for the group to remain broadly flat, assuming stable oil and gas prices. Coupled with our intention to keep capital expenditure in a range of $24 billion to $26 billion per annum over the same period, we have a strong platform to grow shareholder distributions. We expect to grow dividend per share progressively in accordance with the growth in underlying operating cash flow from our business over time. We aim to bias surplus cash to further distributions through buybacks or other mechanisms.

Now let me hand you back to Bob.

Bob Dudley

Thank you, Brian. So let me give you a brief update on the main Gulf of Mexico related legal proceedings in the United States.

The first and second phases of the MDL 2179 trial have been completed, and the court yet to rule on either. The third phase has been scheduled to begin on the January 20 next year. This is the penalty phase in which the court will hear evidence regarding the penalty factors set out in the Clean Water Act. Regarding business economic loss claims, the District Court has now approved a new policy that provides for the matching of revenues and expenses in calculating lost profits for business claims. Additionally, we have filed a motion to allow us to seek restitution from claimants who were overpaid as a result of the previous policy. Separately, the Fifth Circuit denied further review of the issue of causation and approval of the settlement and certification of the class. We will now seek Supreme Court review of these issues.

In the meantime business economic loss claim payments have resumed. In the MDL 2185 securities litigation, the trial for the class action is set for May 18 next year subject to the ongoing appeals around certification of the class. BP believes that all of the plaintiffs’ securities claims are meritless and we will continue to vigorously defend against them. As we have said many times, we are determined to pursue fair outcomes in all legal proceedings. BP is committed to protecting the best interests of its shareholders at all times, and therefore we fully intend to stay the course in all matters relating to this litigation. We continue to compartmentalize the management of these activities to avoid distraction to the thousands of BP people and contractors working in our U.S. operations who remain firmly focused on delivering our business objectives.

In Russia, as you are aware, recent geopolitical events have continued to create levels of uncertainty in the region which we monitor closely. At the business level, as you have seen, Rosneft had a good quarter. In June, it held its annual shareholders meeting at which I was reelected to the board, and the Rosneft dividend for 2013 was approved by shareholders. As expected, the dividend was announced as 25% of Rosneft’s IFRS reported earnings, and represented an increase upon that paid for 2012. We received our share of that dividend in the bank last week at just under $700 million after tax.

Turning to the upstream, our primary focus here of course continues to be carrying out operations safely and reliably while delivering the milestones we expect to underpin the growth in operating cash for the long term. Summarizing progress this year starting with active portfolio management, we have announced a total of $3 billion of divestments in the upstream as part of the group’s objective to divest $10 billion of assets before the end of 2015. This includes the sale of a package of Alaskan assets to Hilcorp which will allow us to focus more specifically on maximizing production from Prudhoe Bay and progressing the Alaska LNG opportunity. We have also sold or farmed-down assets to others that are better placed to extract additional value. In the Lower 48, we signed an agreement to sell our interests in the Panhandle West and Texas Hugoton gas fields to Pantera Energy. In the Gulf of Mexico, we farmed-down 17 deepwater exploration leases to Noble Energy, and in the North Sea we have agreed to sell our partner-operated equity in the Erskine field to Serica Energy.

In exploration we expect to participate in between 15 and 17 wells this year. Ten of those have already been completed, resulting in the two significant new discoveries so far in 2014. We are encouraged by the results we are seeing in testing these plays at Orca in Angola and Notus in Egypt, and we are evaluating the others. We continue to access new acreage, and in the second quarter we received regulatory approval of our award of 24 blocks in the March Gulf of Mexico lease sale.

We continue with the steady delivery of new projects. As I mentioned earlier, we have seen five major project start-ups in the first half of the year and our remaining 2014 project start-ups are on track. After a major program of turnarounds in our assets over recent years, we have been able to reduce the number this year, and to put this in perspective, we undertook 47 turnarounds in 2011, 30 in 2012 and 20 in 2013, and have just eight planned this year. We have completed two so far in 2014 with a further six due by the end of the year. Finally, we have now brought 80% of our priority wells for 2014 online, the majority of them on or ahead of schedule. We expect the

2014 priority wells to deliver two-thirds of total new well production.

Looking at major projects in more detail, most recently the TOTAL-operated CLOV project in Angola achieved first oil on June 12, joining this year’s other start-ups, the Na Kika Phase 3 and the Atlantis North expansion in the Gulf of Mexico, and the Shell-operated Mars B in addition to the Chirag oil project in Azerbaijan. We on track with the two further start-ups planned for 2014. In the North Sea, that’s the offshore construction on the Kinnoull project, which is complete and commission is now over 80% complete, and in Canada the Sunrise Phase 1project is on track with construction of the central processing facility over 70% complete. As highlighted at our March strategy presentation, our current year start-ups are particularly high margin and more than double the 2013 upstream segment average, and are expected to deliver significant operating cash flow for us out to 2018.

Looking forward, we continue to work on our quality pipeline of over 50 major projects using a disciplined, centralized and careful process of selecting the right development concepts, optimizing the projects, and then ensuring we are ready to execute. This is clearly the capital discipline that our shareholders expect.

In addition to this momentum on new projects, we are steadily improving the reliability of our operations. We are seeing the result of our investment in turnarounds and systematic defect elimination. Across our operated assets, we have seen average plant reliability of 92% in the first half of 2014. This compares to 91% in the first half of 2013. This is also reflected with strong plant reliability in our higher-margin areas, with the Gulf of Mexico at 93% for the first half of the year, and significant improvements are being seen in Thunder Horse with higher average plant reliability in 2014 than in the previous three years.

In Azerbaijan, another of our key areas, plant reliability has been 99% for the first half of the year and ended the year above 98% in both 2013 and 2012. The North Sea continues to remain an area of focus to further improve higher margin production; that said, there are still good examples of progress there. Valhall in Norway has seen significant improvement in plant reliability from an average of just 57% in 2012 to 93% in the first half of 2014.

Turnarounds are also going well. As I mentioned a moment ago, we have already completed two this year: the Greater Plutonio facilities in Angola and a Tangguh turnaround in Indonesia, both on schedule. Five turnarounds are well underway in the summer weather window with one further turnaround scheduled to be completed by the end of the year.

Turning to wells, our global wells organization is expected to deliver our highest operated production from new wells and interventions since 2010. We have placed eight Gulf of Mexico wells online in the first half of the year, de-risking our 2014 production delivery. We have successfully completed well work intervention programs in the Gulf of Mexico and Trinidad. Drilling performance has continued to improve with non-productive time decreasing through the first half of 2014 after reductions in 2013 over 2012 levels, and all of this is starting to show up in underlying production growth, particularly in the higher-margin regions. Of course, there can be an inherent lag in this process as well as quarterly seasonality to contend with, but we are encouraged by the trend of greater operating efficiency in many of our assets.

In the downstream, we continued to increase heavy crude processing at the Whiting refinery, reaching a peak of 270 thousand barrels per day during the quarter. Also in fuels, our marketing businesses continue enhanced customer offers and building strategic relationships. For example, in June we had our highest ever week of UK shop sales as we continue to expand our convenience network with Marks & Spencer. In Air BP, we have expanded our China international customer airport network from four to 20 locations. We continue to reduce costs and implement efficiency programs across all of our businesses, which are delivering year-on-year improvements despite inflationary pressures.

In addition, we continue to focus on actively managing our portfolio, completing the sale of our specialist lubricants global aviation turbine oils business to Eastman Chemicals in June. The lubricants business was an official sponsor at the FIFA World Cup in Brazil, which proved to be a great platform for promoting the growing premium Castrol brand to a truly global audience.

So let me end today by summing up our central message to you. BP is an increasingly focused oil and gas business, a business with momentum and a business doing exactly what we said we would do. As we’ve gone about shaping BP’s investor proposition, we have listened to shareholders and thought about what we have heard. We know the oil and gas sector still has much to prove. We need to demonstrate that we can control capital and costs, pick the right projects, and then deliver them flawlessly. We have got that message. I hope that’s what you see when you look at today’s results and the direction we are taking in our business.

In short, our priorities are your priorities. We are actively managing our portfolio to maximize value. We are demonstrating capital discipline and we are focusing on efficiency. Looking out to 2018, we aim to deliver growth in sustainable free cash flow to support growing distributions. We plan to do this through material growth in operating cash flow coupled with strong capital discipline. The first half of 2014 has seen the delivery of some significant milestones towards fulfilling the 10-point plan we laid out for 2011 to 2014. In exploration, we have participated in two significant new discoveries and ten completed exploration wells to date, some still being evaluated. We have seen five major upstream project start-ups, all of them in key regions that are strong drivers of operating cash flow for the group. In the downstream, the upgraded Whiting refinery continues its high throughput of heavy crude, and we continue to focus on operating our assets safely, reliably and more efficiently.

So we have two solid quarters behind us this year and a sense of real momentum in our company. I am confident this will support our enduring commitment to grow distributions to shareholders.

Finally, I’d just like to say a few words about our departing downstream Chief Executive, Iain Conn. After 29 years with BP, Iain is leaving the company and will be stepping down from the board by the end of this year. Iain can be enormously proud of the contribution he has made to BP in that time, in particular over the past few years when he transformed BP’s downstream business, focusing its portfolio and strengthening its performance both operationally and financially. He has been an invaluable member of the executive team and for me and the team a great support. He leaves with my very best wishes and he leaves with strong succession.

So, on that note, I’d like to thank you all for listening and now Brian,

Jess and I will be happy to take your questions.

Question and Answer Session

Operator

[Operator instructions]

Jessica Mitchell

Well, hello again everybody. We’re going to start the Q&A session. I think Bob might like to just kick off with a few words first, and then we’ll take it in the usual way.

Bob Dudley

Thanks Jess. Good morning and good afternoon to everyone. I thought it would be worthwhile for me just to make a couple of comments about Russia. We this morning talked to some of the press here and clearly it’s on their minds, so I thought maybe I’d cover a number of things just by a few observations.

First thing I would like to say that everybody at BP is very, very saddened by the loss of life on the Malaysian airliner. We do mourn those people that were loss and our strong sympathies to all the families affected, and some of our industry colleagues themselves lost members of their teams, including Shell and Exxon, and people know them so it hits quite close to home. I think reflecting today on the questions, I think it’s important to sort of recognize that sometimes these events occur, they are unexpected, they are unintended, and they can actually change the course of history, and I do believe we are in a period of heat of an emotional debate that’s going on and there’s lots of wider political implications. Like many of our peers in many industries, we have commercial interest in Russia as we do in the U.S. and Europe, so we hope that these issues will be resolved among the governments as soon as practical and through dialogue and diplomacy.

Meanwhile, we continue to just monitor very closely; and that said, the nature of our business and that of our peers, particularly in the upstream part of our business, is we invest in many places around the world and we do so for the very long term. We have to take a very long-term view, whether we’re looking at Russia or the Middle East or Africa, the North Sea or the Gulf of Mexico. Because of the commitments of capital involved, we make our investment decisions on a very long view of a country’s future and not on the state of the politics and relationships between a country and other nations at a particular moment. We’re certainly not unique in this. Russia has significant oil and gas resources, actually the largest producer today in the world, which are accessible to commercial arrangements in both exploration and development, and we know that the world will need 40% more energy by 2035 and Russia will remain a key producer. That’s why we and many of our international peers from the U.S., the U.K. here, the Netherlands, Norway and France and Italy and others, China, have made these very long-term investments there. Having said that, we’ll of course abide by any and all sanctions that are constructed by governments.

The second question that came up quite a bit this morning was around this award to former Yukos shareholders, primarily the (Minatep) previous managers of the company. It’s a matter of arbitration matter between the Russian government and a number of those claimants. The arbitration and the judgment which we are still sorting through, because it’s—I doubt anybody on the call has read it. It’s about 600 pages long. There’s not really an executive summary, and it’s small type. But it is—the parties in it, the party in the judgment is the Russian Federation and the government of the Russian Federation – it’s certainly not BP, and neither is it Rosneft, but there’s a lot of questions around that, a lot of speculation right now. But quite frankly, it looks like it’s something separate from us, although there’s lots of questions around it.

I just thought I would pass on a view and a point of view of events as they are unfolding, as they are almost by the day in many areas of the world right now, and maybe that will put aside a few questions later.

So, Jess?

Jessica Mitchell

Okay, thank you Bob, and we’ll then go to the questions, and we’ll start with Oswald Clint of Sanford Bernstein. Are you there, Oswald?

Oswald Clint – Sanford Bernstein

Yes Jess, thank you very much. Thank you very much, Bob, Brian. Maybe just a question on Russia, actually, but more to do with the growth opportunities that you have, especially the unconventionals. If a scenario did play out that there were some technology restrictions, could you talk about what’s needed for your unconventional opportunities in Russia with Rosneft, and also just kind of linked to that, why you have a strategy to go into the Volga Urals for those unconventionals rather than the Bazhenov in West Siberia like some of your peers.

Secondly, maybe just a question on the—you know, the quarter is in the phasing of the maintenance. I guess I was expecting a bit more or a few more of the turnarounds in the second quarter. Could you say, is that planned, or at least—yeah, I think you’ve spoken about it this afternoon about more of them being in the second half, but is that the original schedule or were some of these actually pushed back into third quarter? Thank you.

Bob Dudley

Oswald, yes, thank you. Your first question on the unconventionals in Russia, I think both BP and StatOil have shown interest in the Domanik shales in the Volga Urals region, and it’s an area we know well because of TNK-BP venture and our experience there before, so that was really what focused us, was on something that we know that has promise there – could be gas, could even be oil, and then we’ll see what happens. There’s no details out around sanctions and whether or not it would affect that.

The quarters and the quarterly phasing of the maintenance – I mean, for the most part we often think of the third quarter, and particularly the weather windows in the North Sea in August is a very common time for turnarounds in the North Sea. The two we’ve completed in the first half are in the more benign areas, weather areas of Angola and in the Asia Pacific out in Tangguh – those are less weather prone. And in the third quarter, two turnarounds have been completed in the first half, so it’s usually the second and the third quarters: the Mad Dog, which started up mid to—and will go a little bit further out in time, and then the ones in the North Sea, the Bruce Platform, and then the weather windows in Alaska as well and Greater Prudhoe Bay would be in the third quarte4r. I think that’s probably more than you wanted to know about the turnaround schedule, so.

Oswald Clint – Sanford Bernstein

Thank you.

Jessica Mitchell

Right, thanks Oswald. We’ll then turn to the U.S. and Doug Terreson. Hello Doug.

Doug Terreson – ISI

Hello, good afternoon everybody. Bob, in E&P profitability and margins were very strong versus years past, and I think Brian mentioned the contribution from the Gulf of Mexico which was clear from the U.S. E&P result. But I wanted to see if any of the international positions distinguished themselves in this way as well, or should we expect that more likely to be in the second half of the year?

Bob Dudley

Yeah Doug, hi – thank you. You’re right – the Gulf of Mexico has performed extremely well. The wells have come in not only pretty much on time or a little bit ahead, and the margins have been higher and the rates of those wells have been higher. The one area that comes to mind first would be the new Chirag oil platform, which started up in Azerbaijan in January, and those wells are of course very high margin. Again, Angola, Azerbaijan, the North Sea and the Gulf of Mexico, those are our four big high-margin areas. In Angola, some of them are more or less just starting up, so we don’t have the benefit of the full year yet but we will in the second half of the CLOV wells, the TOTAL-operated project that came in actually ahead of schedule with good well performance there.

The North Sea is kind of a mixed bag. It’s probably the area we’ve had, like all of the industry, a little bit lower reliability than we want, so I think for this year and for the end of the year, Gulf of Mexico, Angola and Azerbaijan.

Doug Terreson – ISI

Okay, sounds good. Then second, in India, I just wanted to see if we could get an update on the action plan in the country. There’s been a lot of cross-currents on government gas pricing policy and some other factors too, so if you could just provide an update, I would appreciate it.

Bob Dudley

Yeah Doug, a bit of frustration for us and everybody in India. We had—we have found additional resources below the one field that we’ve got – in fact, a couple of Tcfs of gas deep down underneath the field of the facilities and a couple of other discoveries out there, and we’ve got satellites to develop. We thought we had agreements with the government to increase the gas price by a formula. Right before the elections, it was put to the side and now there’s been another delay.

My view and the comments we’ve made to the government, it appears to be more economic to develop expensive Australia gas and import it into India, and if they don’t sort of fix this, they’re going to lose and they’re going to evaporate their offshore gas industry. I think they know that. I think they’ve got political issues, but we’re not going to invest any further in the offshore gas until this price gets put in place.

Doug Terreson – ISI

Okay, thanks a lot.

Bob Dudley

Mm-hmm, and they did say—I think they are talking about by October. That’s the last I heard yesterday, Doug.

Doug Terreson – ISI

Great, thanks.

Jessica Mitchell

Back in the U.K., next question from Alastair Syme of Citibank. Are you there, Alistair?

All right, we will move on then to Michele della Vigna of Goldman Sachs. Are you there, Michele? Hello?

Michele della Vigna – Goldman Sachs

Jess, can you hear me?

Jessica Mitchell

Yes, I can, Michele – sorry. We seem to have a delay on the line. Go ahead.

Michele della Vigna – Goldman Sachs

Cool, no worries. Thank you for taking the question. I was wondering, on the tax rate – so you had a very low tax rate on the first half of the year. You are maintaining the guidance for 35%. Should we take this as meaning that from here, we should assume around 37%, or are you just being conservative?

And then a second question on the buybacks. They slowed down in Q2 to about half a billion dollars. Should we assume a reacceleration as you receive the proceeds from the $3.4 billion of divestments that you have already agreed?

Brian Gilvary

Thanks Michele. On the tax rate, we’ve come up with a range around the tax rate, so we’ve said around 35%; but I think something for the second half of the year, it’s impossible to predict what will actually happen with foreign exchange rates, all of the various things that will come through mostly through the fourth quarter around balancing of the tax rate for the year. But something around 35 for the year would imply something around 36 to 37 for the second half. But it’s not that precise, Michele, so I’d just—it is what it is through the first half of this year, but something about 35 for the year would seem a reasonable number still in terms of where we are. It will fluctuate depending on what actually happens through the third and fourth quarter.

In terms of the buybacks, yes as you say, we’ve now completed the $8 billion buyback program, and we will look to continue to stay in the marketplace. We’ve said predominantly we’d like to use the post-tax proceeds of the $10 billion program towards distributions with a bias towards buybacks, and we will simply look to opportunistically do that in the marketplace between now and when we complete the divestment program, which is planned for the end of 2015. So I think you’ll see us ticking along at the current rate, but we have various opportunities to either increase that rate or decrease that rate, depending on other circumstances within the company.

Michele della Vigna – Goldman Sachs

Thank you.

Jessica Mitchell

Over now to Blake Fernandez of Howard Weil. Go ahead, Blake.

Blake Fernandez – Howard Weil

Hi folks. Thanks for taking the question. Good afternoon. I had two questions for you. One, I hate to declare victory on the cash flow targets this year, but as we progress towards second half of ’14, all eyes kind of start to roll forward to ’15; and I know Brian indicated potentially flat cash flow next year, but I’m just trying to see if we can get an idea of what kind of communication or explicit targets we may be looking as we move toward ’15.

Brian Gilvary

So if I can pick that up, we haven’t given you any targets for ’15 other than to say that it could be flat, it could be higher. We don’t expect it to be lower, but we’ve offered you a range of outcomes. I think it really reflects that ’14 was a major repositioning of the company that we laid out back in October 2011, so therefore just to maintain this level through 2015, I think is a very strong signal about the underlying quality of the earnings that have come through this year that are driving that operating cash flow.

We still have more disposals to come. Those disposals will take away some operating cash, but after that we still expect operating cash to be at least flat next year. So I think it’s sort of taking a bit of a breather. We’ve got the big new projects coming on, all the things we laid out in October 2011. The stars appear to be aligned. I think certainly, and I don’t think Bob or the team will declare victory until we’re here at the end of December and we have all the cash in, but things are looking promising in terms of what we can see from the first half of the year. We are still confident of the $30 billion to $31 billion, and we’re confident that we can maintain that through 2015 and then you’ll start to see growth thereafter, as we laid out in March.

Blake Fernandez – Howard Weil

Great, thanks Brian. The second question I had was on the downstream. For one, I’m just trying to confirm Whiting, I see you’ve kind of hit a nice run rate here in 2Q. Should we be aware of any kind of maintenance or turnarounds that would impact throughputs here in the second half? And then secondly on the downstream, with Iain’s departure, just curious if we should be thinking about any kind of potential strategic shifts.

Bob Dudley

Blake, on Whiting as you look out to the end of the year, I think we should continue to see levels of 270 or up. We think we can get 300,000 barrels a day of the heavy oil crude oil going through that. I think if there’s any logistical issues at all, it might be restricted throughputs through the Enbridge pipeline, but that’s—I don’t see that as a big problem, but it’s something we just have to be mindful of. Also the current WTI-WCS differentials, when which we had original assumptions in there of 20, 20-something, low $20 a barrel differentials in our numbers and projections, today that’s running at $26.60 a barrel, so that’s a bit of a boos there.

Then in terms of strategic shifts, I think Tufan has been working with Iain for a number of years. He’s been working in the downstream and in his role really since 2009. I think very, very capable, qualified, a very smooth transition will occur, but we’ll always be looking at strategy but I don’t see any sharp shocks to the planned direction.

Blake Fernandez – Howard Weil

Thank you very much.

Jessica Mitchell

Thanks Blake. Next question from Jon Rigby at UBS.

Jon Rigby – UBS

Yes, hi. Can you hear me?

Jessica Mitchell

Yes.

Jon Rigby – UBS

Thanks Jess. Hi guys. Two questions. The first actually is again focusing on the downstream. There seems to be a lot of moving parts, both sequentially year-over-year, I guess with moving refining margins, market margins, your trading results and the contribution of Whiting. But it doesn’t look to me at the moment that the Whiting net income contribution is coming through as one might expect. I think you’ve talked to a cash flow number of a billion dollars post-tax, which I guess can translate something pretty close in EBIT levels on an annual basis. So I just wondered whether you can talk a little bit more about the moving parts and maybe even characterize against potential what Whiting’s contribution was in the second quarter.

The second question is just on the Macondo provisioning. What things have to happen, do you think, before you can revisit your provisioning from an actuarial point of view, because I’m aware that that number you now have is really quite stale. Thanks.

Brian Gilvary

Thanks Jon. Let me take that latter part first and I’ll come back to the question around downstream results in 2Q. In terms of provisioning, we continue to review it every quarter, and the only thing that’s changed this quarter is our current view of where we are on litigation. We now expect that to take a long, long time in terms of resolution, and therefore you’ve seen us increase the provision predominantly around litigation costs out into the future. So we’ve taken a view on what we now think the timeline may look at and have therefore stretched out the assumptions on that, so certainly beyond the time period we were looking at originally.

Other aspects of the provision, we just simply review quarter by quarter. The only thing that will be probably a change going forward will be the new policies now in place around business economic loss claims. The matching issue that we had that we talked to you about 15 months ago is resolved on the Fifth Circuit appeal where we won that appeal with the Fifth Circuit and a new matching policy was put in place by the administrator. That’s now being administered within the fund and we’ll continue to monitor that, but that resolved a lot of the issues that we had and therefore you’ll start to see business economic loss claims were reactivated through June. At this point, de minimis in terms of payments going out in the millions of dollars, but we’ll monitor that going forward and as payments go out in each quarter, we will charge those to the P&L and that will effectively be eaten up through the headroom so some of those costs will actually be charged against the headroom within the original provisions.

So until that $700 million of headroom is used up, you can’t really expect to see any other movement in terms of the major components of the provision. Notwithstanding, we’re still waiting for what happens post-Phase 1, Phase 2 and perhaps as late as Phase 3 of the trial, so we’ll just continue to review this quarter by quarter.

Jon Rigby – UBS

Will some resolution on causation, whichever way it falls, just help you get a bit greater clarity on what you think the ultimate cost will be?

Brian Gilvary

I don’t think that ruling in itself—we’ll just have to wait to see what happens at the Supreme Court, but that ruling in itself won’t trigger anything in terms of where the provisions are. It will simply be another part of the appeals process around linking the causation components of the fund and the settlement agreement, so that in itself won’t be a trigger either way in terms of provision.

Then in terms of your first part of the question, Jon, downstream results, we did start to see Whiting come through in the second quarter. We saw it in two components, one as you’ll recall that we had a crude unit out in the second quarter of last year to get ready for the Whiting upgrade that went in, so we’re seeing the benefits of that. We’re also seeing the benefits of the fact that we hit the 270,000 barrel run rate during the second quarter with the spreads up over $20, so we saw the benefits of that.

To some respects, that’s been mashed, or you can’t see that come through in 2Q, and I would just take you through versus the first quarter result which because in 1Q, our fuels business had a very strong result off the back of supply and trading. The result in 2Q’s supply and trading was below an average quarter. We had a significantly higher than average quarter in the first quarter and below average in the second, so that movement to some degree masks what you saw coming through in terms of Whiting. Also, 1Q versus 2Q, you had the issue around the low petchem result, which is something like $100 million swing quarter-to-quarter.

So if you see through all of that, actually there are underlying improvements coming through through Whiting.

Jon Rigby – UBS

Thank you.

Jessica Mitchell

All right, we’re going to take a question next from the web from Iain Armstrong at Brewin Dolphin. It’s on Russia, and the question is could part of your holding in Rosneft be subject to the recent ruling on Yukos given that it was purchased from the Russian state?

Bob Dudley

Yes, thanks Jess and thanks Iain. It goes back a little bit, very related to the last comment I made at the introduction, which is really this arbitration between the Russian government and these private claimants, which are the former Yukos managers in many ways. This is an arbitration ruling against the Russian Federation, the state government itself. It’s not a ruling on Rosneft and it’s certainly not a ruling on BP. I don’t see in any way that we’re party to this. We’ll just watch and see what happens with this, but that’s not—that’s a risk that we don’t believe is realistic.

Jessica Mitchell

Okay, thanks Bob. On the telephone lines then in the U.S., Guy Baber from Simmons & Co.

Guy Baber – Simmons & Co.

Thank you guys very much. Can you hear me okay?

Jessica Mitchell

Yes.

Guy Baber – Simmons & Co.

Okay, great. I wanted to dig a little bit deeper today on the strength in Gulf of Mexico production, but your U.S. liquids output up nearly 100,000 barrels a day year-on-year is clearly material in driving a very positive mix shift. Since there’s so many moving parts there, I was just hoping you could perhaps better understand the momentum you’re seeing in that business, so could you frame for us how much of that growth we’re seeing right now is major project driven versus a function of lower turnarounds versus quantifiable improvement to asset reliability relative to prior years, and any other factors that you think might be material for our understanding. And then I have a follow-up as well.

Bob Dudley

Yes, okay Guy, there’s a lot of pieces in that. Of course I’m going to talk about sort of our four major hubs here. First, the production outlook and how we see it increasing now, I will talk about the major project ramp-ups on Na Kika Phase 3 and the Shell operated Mars B – that’s part of it, the major project start-up on Atlantis Phase 2B, and then Thunder Horse and Atlantis new well deliveries and the well work delivery at Thunder Horse. Those are sort of the big parts of it here.

We’ve got—in the second quarter this time, we’ve got about 38,000 barrels a day above what the first quarter was due to what we call strong wedge performance. We’ve got 10 rigs now operating in the Gulf – we had five at the end of 2009, to give you a sense of that. The activities in the second quarter were five new wells delivered really in the first half. We had two on Na Kika, two on Atlantis, one on Thunder Horse, and the second quarter wedge delivery was about 46,000 barrels a day higher than our plan. So we’ve had first half work overs, we brought three Thunder Horse wells back to production.

So you know, I can continue to give color on this. We normally don’t give the exact figures of the Gulf, but we’re producing today over 250,000 barrels a day, and I think that’s all I’ll say. I’ve got Mad Dog down on turnaround right now. So it’s a mixture of some of the new projects, but I think when you look at the quarter overall, I looked at it at the five—those five new high-impact wells is where it really exceeded some expectations.

Guy Baber – Simmons & Co.

Okay, great. That’s very helpful. My follow up is on your thoughts around the evolution of operating costs, but you’ve obviously mentioned before the need to change the business model in the Lower 48 as justification for separating that business, and we can imagine there is significant running room to reduce your operating costs and improve efficiencies in that business that could be material to your overall results. So the question is, are meaningful cost reductions from that business included within your flattish 2015 operating cash flow expectations, or should we be thinking of that as potential upside? And are there any other specific units or geographic areas you would highlight where you see meaningful potential for significant operating cost savings that could have an influence on 2015 cash flow?

Bob Dudley

Okay, very good question. The Lower 48 restructuring, which we’re doing which we’re beginning to see the results come through even already, we’ve taken some steps—it’s still located there in our Westlake complex in Houston. We’ve identified the team and the people that will go with the Lower 48. We’ve identified and signed a lease, actually, on a new building to move that to a different, I’d say cost effective location. We are already seeing efficiency of decision-making quicker – this is what we intended to do with it. We’re going to do this to make sure that it remains safe and reliable how we operate this, but there’s a lot of improved operating efficiency there. We’re going to see spending—we’re going to spend our money more efficiently, most certainly. We’re going to improve and more focus-like management of the supply chain, and these numbers are not really in the forecasts that we’ve laid out to 2015. We have an assumption in there in 2015, and I think probably the bigger factor in terms of the flatness of the 2015 is Brian’s point about the divestment program, so we will divest some operating cash so that’s where it will be flat.

So there is upside, Guy, most certainly in the Lower 48, and we’ll be back and talk to you about this every quarter. For those of you who don’t—may not be that familiar with it, we’re going to separately disclose the financial results for the Lower 48 beginning in 2015, so you’ll have more visibility on that.

Other areas to do this – well of course, we have kicked off a study, probably began to be driven out of the Lower 48 in our entire upstream business. We’re going to look at efficiencies primarily across North America and then some in Latin America as well to work to a model to simplify the company. We’ve said all along that after the accident that we put in place processes and systems to make sure that we managed our risks very carefully. We put in place multiple checks and balances in our organizational structure. We now have safety and risk management systems in place, and so that’s allowing us now to simplify our corporate structure. We have returned the confidence to our operating people of making decisions on drilling and in projects in a way that we didn’t have, and you can all sort of sympathize with an organization that really had a legal team looking over their shoulders at every email they wrote because they saw their colleagues in court. So I think we now have put in place tight systems and process to bring back that confidence and being able to make decisions faster.

We’ve done a whole set of simplification things across the business, combining three separate internal audit functions into one, merged our brand and communications team, created a global business service organization to help with supply chain and our accounting processes, so I would say a lot of that is not yet in the numbers but there is upside, and we’ll just keep telling you about them. It’s not a magic wand that we’ll see a giant stair-step up unexpectedly, but it will definitely make a difference in the future. That’s probably more than you wanted to hear, Guy.

Guy Baber – Simmons & Co.

No, no, that was great.

Jessica Mitchell

Thank you. Next up, Theepan Jothilingam of Nomura.

Theepan Jothilingam – Nomura

Yes, thanks Jess. Good afternoon, gentlemen. A few questions just on the upstream, actually. I think you talked about performance in the base for the U.K. and the opportunities there. Looking forward, particularly beyond 2015 and sort of drivers of cash, could you give an update on the growth projects for Quad 204 and Clair Phase 2? And then secondly, Bob, I wanted to pick up on your remarks on Prudhoe Bay and also some of the work overs this year. Will these work overs potentially improve performance with that asset on a more structural basis, or is this just a sort of normal seasonal turnaround? Thank you.

Bob Dudley

Yes, well you’ve asked about Quad 204 and Greater Clair. Let me just start with Greater Clair. We just yesterday approved a sixth appraisal well on Greater Clair. Greater Clair is coming along well and the reservoir definition is coming into focus well. It is, like a number of projects around the world, somewhat held up by the yard spaces in Korea where we’ve got things that we want to get done but they’re held up a little bit by some of the big Australian projects, and that of course is one of the—is basically some of the criticism of our industry in terms of overspending and longer time. It actually backed up the yards, although I think we’re heading into a phase now where the yards are going to get cleared out and a project that probably would be on time and maybe seeing a little bit of a delay.

Quad 204, I think I’d just like to say is it continues, the development of it continues. I think you can get in touch with Jess here, but 2016 is our start-up year. It is in the execute stage. Gross capacity of that facility would be 320,000 barrels a day, and we’ve got a 36% working interest in it. But other than the fact that it’s on track, I don’t have any real specific comments for you today on that.

In Prudhoe Bay, of course the change in the oil legislation in Alaska has most certainly helped the state as it is, and so we’re investing more in speeding up some of the work that we’ve been doing in Prudhoe Bay. I thought you were going to ask about the LNG projects up there, but I think other than sort of the bread-and-butter activity that we do in Prudhoe Bay on the oil, there’s no real significant news out of that. We did sign an agreement with the State of Alaska and Exxon and Coneco to plan the development of the gas project, which is effectively the gas cap out of Prudhoe Bay, and the Point Thomson field, and an application has been made for the export of that gas.

But no, I think the work over programs in Prudhoe Bay, other than they’re more economic so we’re doing more of them, there’s not much else to say about that.

Theepan Jothilingam – Nomura

Okay, thank you.

Jessica Mitchell

Next question, Anish Kapadia of Tudor Pickering Holt. Go ahead, Anish.

Anish Kapadia – Tudor Pickering Holt

Thank you, good afternoon. A couple of questions, please. Firstly on Rosneft, (indiscernible) mentioned in their results that BP prepaid $1.9 billion for a five-year oil supply contract from Rosneft in July. I was just wondering if this impacts your working capital and any of these targets for this year, and if there are any further such types of deals on the table.

Then my second question is on your disposal program. It appears to be turning into much more of a buyer’s market when we look at the M&A space. It seems like the majority of your peers are adopting kind of similar, fairly large disposal programs. Just wondering how you see that impacting your disposal program, and are you willing to give away some value just to meet the $10 billion target? Thank you.

Brian Gilvary

So Anish, on the first question, it was a pre-financing deal where we take the off-take, but it was covered by a syndicate of banks so that doesn’t directly affect BP’s working capital. That’s actually financed through a syndicate where we guarantee the offtake piece, and we do a lot of those deals outside of this space. That’s something that sits as part of our supply and trading and we manage that within our existing working capital requirements, so no additional working capital but we look in terms of the quality of the portfolio.

Bob Dudley

On the divestments, I think hindsight shows that we got very good value for the over 40, which is now $41 billion of divestments that have been done. We have pieces of our business that we continue to look at that have more value to others. Most recently, we divested down to reduce our exposure in the big Oman-Khazzan field to the government. That was half a billion, a very fair value there. Aviation lubricants, a very specialty business, sold to Eastman Chemicals – that got a good price. I don’t believe they want that price public, but it’s a good price to us. The Texas Hugoton gas assets that we just sold for roughly $400 million, good value again.

So I don’t see that we would be willing to give away value on the divestment programs just to hit the target. They have to make sense; but having said that, when we look through our asset base, we believe we can identify $10 billion and we’re one-third of the way through that now. But you are right – the market does have a lot of things on the market, but we’ve still got some hidden gems in our portfolio.

Anish Kapadia – Tudor Pickering Holt

Okay, thank you.

Jessica Mitchell

Right, I see that Alastair Syme is back on the line. I’m sorry we lost touch with you earlier, Alastair. Are you there now?

Alastair Syme – Citibank

I am, Jess. Can you hear me this time?

Jessica Mitchell

Yes, we can.

Alastair Syme – Citibank

Brilliant. Thanks everyone. Can I just ask a question on the sort of suite of pre-FID projects, and I’m sort of referencing your comments, Bob, about yard capacity maybe freeing up a bit. I’m thinking sort of Mad Dog 2 and Browse, Thunder Horse expansion in Angola, about whether collectively you think those projects are robust or getting more robust, or there’s more work to be done.

Bob Dudley

Yeah, good question. Mad Dog is one that we recycled, and I think it’s getting much more robust. I think the partners feel that way as well, so we’re sort of in pre-FID for it and I think there’s a good change that that one will come through. We’ll review it probably before the end of the year, although that’s not something we’ve absolutely decided. The Persephone project, which is operated by Woodside in Australia, we think that’s a good project and in fact we’re very close to saying—giving the go-ahead on that one. Thunder Horse South is another one that the work is going well on, and I expect all three of these projects to come through. I’m not going to give a date for it, but I wouldn’t be surprised if all three of them come through before the end of the year.

They do look good, and recycling these projects has proved to be a very good thing, particularly on the Mad Dog project, a little bit like Browse in Australia, which is another one that’s been recycled.

Alastair Syme – Citibank

Maybe just to pick up on Browse, as you look across the LNG market, are you sort of confident that the state of the market is going to allow you to push forward on these?

Bob Dudley

Well, the new development concept on Browse most certainly has made that project economic and competitive out there. The world is just going to continue to need lots of energy. If you look at these growth forecasts over the next 20 years or so, natural gas being the cleanest burning fuel out there – that’s without any assumptions around pricing of carbon. So yes, as long as the capital costs can be held within the right tighter boundaries and schedules on place, these projects are going to look pretty good. But we’re going to choose very, very carefully. There are obviously other projects out there that we had opportunities to be part of or buy into that we have said we’re less confident of, and we haven’t done that.

Alastair Syme – Citibank

Great, thank you very much for your time.

Jessica Mitchell

Next question from Lydia Rainforth of Bar Cap.

Lydia Rainforth – Bar Cap

Thanks Jess, and good afternoon everyone. A couple of questions, if I could. One, just a clarification just on the realizations in the upstream for the U.S. on the liquids side. Given the greater contribution of the Gulf of Mexico within that, I was a little bit surprised to see them sort of broadly flat both year-on-year and quarter-on-quarter. Is there anything unusual within that, or is there any help that you can give us on how that will develop going forward?

Secondly Bob, thank you for your comments around the cost side, and if I could just go back to that a little bit just to clarify. Is this around changing the way that BP works again from where it is now, or is it purely about the fact that you’ve got BP working how you want it to and it’s now all about simplifying the company from the processes that you already have in place?

Brian Gilvary

So Lydia, on the first question, if I can just pick up the first question around realizations, we did get a benefit in the first quarter in terms of average realizations that the Gulf of Mexico grades are trading at better grades than WTI than they did through the second quarter, so it’s really a grade spread issue. It’s nothing about—that’s the only thing was going on 1Q versus 2Q, is around the actual differentials.

Bob Dudley

And of course, did you talk about the brand differentials in the Gulf? Sorry, I had my—

Brian Gilvary

No, no – sorry, it was Gulf versus the WTI in terms of what’s happening.

Bob Dudley

Yeah, on the cost side, Lydia – thank you. I think I couldn’t agree with you that we have the company working the way we want it. I think there’s lots still to do. We definitely are happy with the functional model with the changing of the decentralized upstream organization to a functional model around projects and drilling and operations through the geographies of the upstream, and we’ve got supply chain management globally in the upstream. I think we’re still a complicated company. I think our partners sometimes feel that way. We’re still working our way through separating out the separation of the safety and operational risk organization, which has been a separate organization from the line operating organizations. We’re combining those, which from our past and history was the right thing to separate things to just have double checks and balances on decisions that could affect accidents and safety. Now, we’ve got the confidence to put those organizations together. That brings with it a certain amount of complexity when you make that kind of change. I think we’ve got things to do in terms of costs around training and simplifying and being much more targeted in how we train and develop people. I think the lessons we’re learning in the Lower 48, which is a business that we fundamentally re-based to operate at $4 an Mcf but really wasn’t going to be competitive for capital, now we’re going to make another step change there in making that more efficient, and then we’ll have learnings from that that we can use in other places around the world.

After the accident, we in many ways began to put offshore safety standards on working onshore, and that actually wasn’t making us competitive and it’s not necessarily what we needed to do. The right thing to do for our period in history, but we’re still simplifying some of that. So I think it’s a journey, it’s a good start with the functional reorganization, but we’ve got lots to do and we’ve got targets in place which are not yet in the ones that we’ve said publicly to both bring more efficiency rather than targets. We’re not going to have cost-cutting targets, we’re going to have activity reducing targets because this has to be kind of surgical rather than just as a blunt cost-cutting target.

Lydia Rainforth – Bar Cap

That’s great, thank you very much.

Jessica Mitchell

Thanks Lydia. Next question from Stephen Simko of Morningstar.

Stephen Simko – Morningstar

Hi, good afternoon everybody. My question is just related to the business economic loss payments restarting, and visiting the economic settlement website if you look at the July 1 claims administrator public data, you would see that loss claims hadn’t started, so obviously they’ve started this month. It’s just a short month—or I’m sorry, it’s just a short period of time and a small data sample, but it looks like about $41 million of payments have been made, and if you were to look at that with the number of payments—or excuse me, the number of claims that were paid, the average amount paid per claim looks like it’s down a lot compared to before the Fifth Circuit court ruling last October. What I’m wondering is, is there anything to read here in terms of the new accounting framework in place affecting the average pay or the average amount paid per claim, and if not, any other comments on that data would be great. Thanks.

Brian Gilvary

Yes Steve, I think it’s too soon to draw any conclusions at this point. Payments actually started in June, late June, and I think the administrator and the team there are working through different types of claims and working up the various accounting books of how to process those claims. We now have in place in that fund a new chief executive that’s running the facility, and they are, I think, going through each one of the claims carefully to ensure that they are meeting the requirements of the new matching policy that’s been put in place. So I think it’s just too soon to try to draw any conclusions, but you’re right that the nature of the payments being paid so far are relatively small compared to what we’ve seen historically. I think you’ll need a number of months of claims data before we can start to draw any conclusions from that.

Stephen Simko – Morningstar

Makes sense. Thank you.

Jessica Mitchell

Moving now to Thomas Adolf of Credit Suisse. Are you there, Thomas?

Thomas Adolf – Credit Suisse

Hi, can you hear me?

Jessica Mitchell

Yes.

Thomas Adolf – Credit Suisse

Hi, thanks for taking my questions. I’ve got a question on Iraq and a few project-specific questions, please. Just a quick one on Iraq – earlier on you said you like to take a long-term view, but I guess in light of your experience since you moved into Iraq in 2009 and where we stand today, what is your current thinking on Iraq? Clearly the fiscal terms are pretty bad to begin with, and the future opportunities never materialized. Isn’t it really bad use of your precious capital, and some of your peers begin to think that.

The second question on the projects, I’m just trying to get an understanding for whether the Tangguh price review was linked to BP; in other words, have you managed to negotiate for a higher slope? And the other project-specific question I had was related to your Brazil upstream asset where your partner was Maersk, and Maersk recently took a major impairment charge, whether you’re still comfortable with your carrying value there. Thank you.

Brian Gilvary

So maybe on that last point, I’ll just pick that up to say actually Maersk did with those three assets is effectively write down to a level pretty close to where BP holds those assets today, so there’s no implication for BP or read-across from what Maersk did around that investment.

Bob Dudley

Okay Thomas, on Iraq, we’ve always felt that the Rumaila field is different. It is a production-sharing contract – it’s really a contract with a fee. It’s low margin, but it produces 1.4 million barrels a day. It’s by far and away the largest project there. For us, the economics have actually been very good. The internal rate of return, the return of capital comes back very quickly in the form of a return of your capital plus a fee, but because of the scale of it, this has been a good investment for us and continues to be.

We are in discussions with the government on the enhanced field development plan. That could improve the terms as well for that. I mean, Iraq is a very troubled country, but just to give people a little bit of reference, Kurdistan up in the north where we’re not operating, this new ISIS area of turmoil and the Sunni areas, the major oil fields in the south are sort of bottom down at the end of the funnel of the country. It’s a long, long way from where the trouble is. It is out in the desert in an unpopulated area near the Kuwait border and has been operating straight through this period without interruptions. Cargoes are being loaded and sold, and our ability to work with Baghdad and the ministry to ensure all this continues sort of unbroken.

So I understand the nervousness in the industry around Iraq, but I do think the Rumaila project is something different compared to the other agreements that have been signed in the country because of the scale.

Thomas Adolf – Credit Suisse

Okay, and on the Tangguh price review?

Bob Dudley

Yeah, we can’t go into the real details of the price specifics, but we have improved the price significantly on Tangguh using the price review clause in the contract. The price of the Tangguh gas will go up at the beginning of this year. It’s gradually to the near market pricing levels that both sides feel are fair, and I think that’s probably all we should say about that. We have agreed that the new trains, when they come through, around 40% of the gas will go into Indonesia, which is short gas and needs gas; but the pricing on that is also, I think, fair and attractive for both sides.

Thomas Adolf – Credit Suisse

Okay. Just a last one – are you still confident you can take FID on four projects this year? Thank you very much.

Bob Dudley

On four projects? Did you say four?

Thomas Adolf – Credit Suisse

Yeah, because you said on the first quarter results, it will be four projects you want to take FID on this year.

Brian Gilvary

I think it’s a bit premature. We originally laid those out. We’re still working through those. Certainly three we can see—

Bob Dudley

Well, that’s from here to the end of the year, yeah.

Brian Gilvary

Yeah, so it’s probably premature to make any comments on that at this point.

Thomas Adolf – Credit Suisse

Okay, thank you.

Jessica Mitchell

Thank you, Thomas. Moving now to Bertrand Hodee of Raymond James.

Bertrand Hodee – Raymond James

Yes, hello. I have two questions. First, you had the impairment in upstream in the non-U.S. linked to an asset sale. It was around $444 million. Can you tell us to what asset it is linked? Then the second question on India, given your level of initial investment, it was around, I think $7 billion, do you think if gas prices were to stay at current levels, can we expect or do you feel it would be appropriate at some time to take an impairment?

Brian Gilvary

So on the questions around the second quarter, they were related to both North Sea and Alaska. These were sort of split across the piece, and we haven’t given you the breakdown for those. In terms of India, again I think it’s premature but we review our India investment quarterly, and at the moment our whole value source sits based on the information that we had at the value at which we acquired the assets, and we’ll have to wait and see. It would be premature to try and predict what will happen with gas prices with the new government in place, but as we understand it, that will be reviewed by October 1.

Bob Dudley

Yeah, or in October.

Brian Gilvary

In October – sorry.

Bob Dudley

But one thing is clear – if that price doesn’t change, you’re not going to see us pouring more capital into it. We’ll just say, wait and see.

Bertrand Hodee – Raymond James

And the last one, if I may, during Q1 results, you hinted to an encouraging trend in your upstream cash cost, expecting to see your overall upstream cash cost to be down as this year ’14 compared to ’13. Given, I would say, your good operational performance in Q2 especially, do you still confirm that trend in your overall upstream cash cost position?

Bob Dudley

Well, we did see a reduction from the first quarter into the second quarter on the upstream cash costs. We even—we had higher well work and we had a lot of seismic activity a year ago. We’ve had higher well work this time, but those cash costs have still kind of gone out. The full year ’13 to ’14 I’d say are about flat to somewhat down, and I think that’s probably all we can say. I think we can do that, even the sector inflation which we now see is around 4% for both capital and operating costs. I think a lot of that—you’re going to see that and a lot of it is starting with the North American restructuring.

Bertrand Hodee – Raymond James

Thank you.

Jessica Mitchell

We’ll take a question now from Gordon Gray of HSBC.

Gordon Gray – HSBC

Thanks. Yes, I just had one thing left to ask, please. On Algeria, you’ve obviously been through some very difficult times there, but I wonder if you could just give us an update ahead of starting or planned starting of production next year, how you view the potential now relative to your original expectations, and also how you’re dealing with all the ongoing security challenges. Thanks very much.

Bob Dudley

Yeah Gordon, thank you. We have—those of you will recall in January of last year, we had that terrible tragedy where the terrorists came into the field, the Ain Amenas field down in southeast Algeria. We have spent a lot of time, as has our partner Statoil, and actually working directly with the government and (Sonotrack) on the security, and so I had a review just this last week of people who had been to Ain Amenas and seen the increased security down there. So we didn’t take that decision lightly, but we are back at work in Algeria in Ain Amenas and In Salah.

We had plans. Originally the plans were to start up Ain Amenas and In Salah in 2014. Obviously that was pushed back by these events. We still believe that the start-ups of at least one, if not both of those projects, can happen in 2015. There is some risk to it, but that’s where we see today. These are good return projects for us. We’ve been working there for a long time. The return on capital of these projects has been very good, and both we and Statoil have committed to getting back to work there.

Gordon Gray – HSBC

Okay, thank you.

Jessica Mitchell

Question now from Irene Himona at SocGen.

Irene Himona – SocGen

Thank you, Jess. Good afternoon everyone. I had two questions please. So firstly just to clarify, do you receive the Rosneft dividend in roubles? Second question on working capital, you had a big $6.8 billion build in 2013 and you said earlier this year that about two-thirds of that would reverse over the next 18 months. In the first half ’14, we’ve heard only about $339 million. I just wonder if you see that cash release accelerating in the next few quarters. Finally, Deepwater Horizon, your press release states that the PSC has now filed a motion seeking to amend the revised matching policy. I wonder if that is a new development, so are they appealing the appeal, which you won, and does it mean that it’s all kind of prolonged? And importantly, do you have to settle claims whilst all that is taking place? Thank you.

Brian Gilvary

So Irene, I’ll pick up those first two points and I think Bob will pick up the last one on Deepwater Horizon. On the first one, yes, we received the dividend in roubles last week, and that was translated into dollars so we ended up with $690 million in our bank account, and that was as predicted. And then in terms of working capital build, just not quite sure what numbers you were working with, but we were talking at the end of 3Q last year that the actual build was around $5 billion for last year and that we expected around two-thirds of that to reverse out. Nothing’s changed – as you’ve said, through the first and second quarter, relatively low amounts of working capital have come back, but there’s many, many moving parts in our working capital position that get driven by price, the volumes that we’re carrying at any one particular point in time. But in terms of looking through what we could see building last year, we expected two-thirds to reverse back out. We haven’t gone back and looked at that with this quarter’s results, but the majority of the operating cash that you see coming through in the first and second quarters is through EBITDA in terms of the improved revenues that we’re seeing in earnings off the back of production.

Bob Dudley

And Irene, hi, this is Bob. On the matching thing, to me this is a fairly straightforward, common sense thing that business economic losses should have to match their expenses with the revenue they receive. An example – if a farm plants its crop and submits a claim as a loss, but doesn’t have to count the sale of the crop as revenue, this just wasn’t right. So we did go to court with that, appealed, won the appeal, and those are the detailed processes for processing the claims that are now being used by the claims facility. But that does take, I suppose, money out of the pockets of plaintiffs’ attorneys who might get 30% on any claim on these kinds of things, and they have filed an appeal. I don’t regard it as—it’s not really significant, it doesn’t even match common sense in my mind, so I wouldn’t get distracted by that. There’s lots of other things that we are debating and arguing about which are more substantive than that one.

Irene Himona – SocGen

Okay, thank you.

Jessica Mitchell

Thanks Irene. Now, Martijn Rats at Morgan Stanley.

Martijn Rats – Morgan Stanley

Hi, hello. I wanted to ask you two questions. First of all, with regards to Egypt, there has been some conflicting reporting on where you are with regards to the next phase of investment, particularly with regards to West Nile Delta. Secondly, I wanted to ask about Shah Deniz, because with all this sort of turmoil in Eastern Europe, I can see how this would have become a much more attractive project but I can also see perhaps some downside risks. I was just wondering in your assessment, Shah Deniz, has that become a better project or a worse project?

Bob Dudley

Hm, okay. Well, let’s maybe start with Egypt. West Nile Delta is a large, almost shovel-ready project on the West Nile Delta. It develops offshore gas and brings it onshore for the domestic market, and it’s a very economic project, it’s a big project. I think what we have been doing is working with the government. This is a project they really want to see happen. BP operates it and has about 65%, is 65% of the project. I think we’re looking for ways to accelerate because Egypt needs gas. They’d like us to accelerate. There may be some facilities available through the BG system that may be playing a part in this as an option to accelerate, but that project is going forward.

I know there is turmoil in the country as well. We have operated in the country for more than 50 years, and for example, all of our oil production in the country, in the Gulf of Suez has produced without missing a day through all of this period. So I think that’s—I’m not sure what you’ve read, Martijn, but that’s sort of where things stand there.

Shah Deniz, we’ve thought it is a good project all along, and it’s got behind it additional resources down the road that can go through these systems. So we are off and running. A final investment decision was made in December. There’s more than $8 billion of contracts that are out. It’s actually ahead of schedule. This is regarded as a strategic project for all the countries all along the way, so we feel very pleased with that. There’s been some swaps and changes or ownership – we bought another 3.3% of it in December, Statoil I think moved their interest from 15 down to 10, TOTAL’s 10% interest, I believe they sold that. Turkish companies have gotten involved, so there’s a lot of interest in the region in it.

So no, I don’t see this as anything other than continuing to be a good project, rather than—and you know, it’s strategic for some countries, so it’s certainly important and remains important for us.

Martijn Rats – Morgan Stanley

All right, thank you.

Jessica Mitchell

Thanks Martijn. Next question from Chris Coupland at Bank of America Merrill Lynch.

Chris Coupland – Bank of America Merrill Lynch

Hi there, thanks. Just two left. Firstly, just wanted to see what your views are on the MLP market in light of your Lower 48 separation. Is that an avenue that you’d consider potentially for other assets? And secondly, Brian, just wanted to get back on regarding buybacks. You said earlier you want to keep them up at the current rate. Now, the current rate has been quite varied – half a billion in the second quarter, 2 billion in the first quarter. Is it going to fluctuate, continue to fluctuate, or are you simply looking at a steady rate to end by the end of 2015?

Brian Gilvary

Thanks Chris. Just to clarify my point on the current rate, I was thinking more over the last few days, not the last few quarters. So in terms of where we are today, we’ll probably maintain a current rate of—it’s de minimis, so $6 million to $7 million a day at the moment, because we look to re-phase things now. Now we’ve got the $8 billion piece done, we’ll now look at the post-tax proceeds and make choices around how we choose to distribute those back to shareholders. So I don’t think read too much into the answer other than the fact that we will maintain complete flexibility around the buyback program, but the intent is the same – that we will look to redistribute the divestment proceeds, and as those proceeds come in and we get the cash, we will look to execute that through the next six quarters by the end of 2015.

On the MLPs, we’ve looked at MLPs many times over the last 10 years, actually, and we still don’t see anything attractive. We’ve actually sold off an awful lot of our midstream in the U.S., and you’ve heard Bob talk in previous quarters about the amount of de-risking that’s gone in. So we still have one or two pipelines left which are very strategic to us in terms of our other asset positions within the U.S., but we don’t see the MLP option as being particularly attractive, nor the ability to be able to continue to keep those MLPs topped up as you go forward with putting more assets into them. So we’ve actually sold off a lot of our midstream, and what’s left is quite strategic so it’s not really something which we would look to try to exploit going forward. But we’ve kept an eye on it, and as I say, we’ve reviewed it a number of times over the last 10 years.

Bob Dudley

Yeah, we’ve done so much restructuring in North America, but you have to feed them with assets and we’ve actually divested so much of that already.

Chris Coupland – Bank of America Merrill Lynch

Got it. Thank you.

Jessica Mitchell

Right. Moving on to Fred Lucas at JPMorgan.

Fred Lucas – JPMorgan

Thanks Jess. Two questions, please. First of all, could you put a number to your upstream cash costs, dollars billion please? And secondly, can you put some color to the connectivity dependency of the BP PLC dividend to dividend receives from Rosneft? Here I’m thinking about what if more extreme sanctions were imposed or the situation with Yukos gets messy and dividends are blocked to BP. Would have that immediate dislocating effect on BP’s dividend, or is there a buffer to protect the PLC dividend?

Brian Gilvary

That’s a great question, that last one, Fred, because there’s been a lot of speculation this morning about some additional disclosures that we added to our stock exchange announcement around risks and uncertainties, none of which we—it may happen but we nevertheless for good due diligence and legal purposes, we have to put those uncertainties in. But I think just in the context of that question, the dividend for this year represents on an annualized basis around 2% of the operating cash flow we’ll generate, and therefore in terms of the liquidity of the company, it is de minimis in terms of anything further that may happen. So from a financial perspective, I think it’s more about the $15 billion that we hold on the balance sheet around that investment, and therefore the risks and uncertainties associated with that going forward is what those references towards if sanctions were to escalate to that position. But none of that we can see happening right now. Nothing has happened so far that would impact that, but in terms of liquidity and finances, it would be de minimis in terms of any impact if that were to happen, so it’s a very important question to raise.

And sorry, Fred, the first part of the question was around cash costs. We don’t even share with you the absolute cash costs for the group, so I’m afraid – I’m sorry – but we can’t actually share with you the specific cash costs for the upstream.

Fred Lucas – JPMorgan

Okay, well thanks for clarity on the first one, anyway.

Jessica Mitchell

Great, thanks Fred. Lucas Herrmann at Deutsche Bank.

Lucas Herrmann – Deutsche Bank

Yeah Jess, thanks very much, and afternoon gentlemen. Two or three, if I may. I’m sorry to be so late on. Bob, firstly and partly prompted by Iain’s departure, I seem to remember 60 was the age for retirement for a CEO at BP. Can you remind me whether that’s correct and the extent to which the company is starting to think around succession planning for your good self? Secondly, I wonder Brian whether you could, or whether either of you could give us some idea of the split of profitability within the fuels value chain between the Americas and elsewhere. I have to say that in the context of what you’ve indicated you feel you should be capable of moving towards, your numbers through the second quarter seem, I’d say, very light. Thirdly Bob, in your capacity as director of Rosneft, can you make any comment on how you feel the sanctions that have been introduced to date around bank lending and extending loans over 90 days may impact the Rosneft business over the short, medium and longer term?

Brian Gilvary

So Lucas, if I could pick up the easiest of those three questions, which would be around the downstream profitability – and I’m hoping my boss to my left isn’t going anywhere any time soon. But on the profitability, we have seen the improvements around Whiting, the ramp-up of Whiting through the first half of the year, so if you looked at that relative to the rest of the fuels business, that would be a positive. I think refining margins, if you look at them year-on-year, they were significantly down in the second quarter versus the same period last year across the piece, and I think the only salient point to mention between either this quarter versus last quarter or this quarter versus same quarter last year for downstream was that we had both in the first quarter this year a very strong supply and trading result and in the second quarter of last year a stronger result than we had in the second quarter of this year. That would probably be the biggest variance that you’d see around the downstream numbers.

The other piece that sits as a backdrop, which I mentioned earlier, was the chemicals result.

Lucas Herrmann – Deutsche Bank

Sure, but Brian, the question asked was also can you give me any idea of what the split of profit between the U.S. and rest of the world is in the fuels value chain, how do they break?

Brian Gilvary

We don’t disclose that, Lucas, but what I would say is simply as you see Whiting—if you look at where the light heavy spreads are today at over $26, and you see that we hit the 270,000 barrel a day key point through the second quarter, you should assume that therefore we are starting to see more performance coming through the fuels value chain in the U.S. But we don’t give that level of disclosure – I’m sorry.

Lucas Herrmann – Deutsche Bank

Okay, thank you.

Bob Dudley

Lucas, hi, it’s Bob. Maybe first on Rosneft, I’ve got to be careful as a director so I’ll just sort of make some broad comments about this. The sanctions were against new debt with 90 days or longer maturities on it, which is where it stands today. Who knows – there’s lots of rumors about additional sanctions coming out, but at the moment I think Rosneft has brought in significant cash from its forward crude sale deals with the Chinese, and I think they have actually held a lot of that cash in anticipation of what uses it might be. So I think they’ve got lots of flexibility there because of these partnerships in Asia, and in terms of other things around my dealings with him, Igor Sanction—Igor Sanction? That’s a new nickname. Igor Sechin, he’s been sanctioned to date as an individual, and of course I don’t deal with him and BP doesn’t deal with him as an individual. The U.S. government has made statements that said it’s okay for me to represent BP on the board of Rosneft for the business of BP and Rosneft business. So we’ll see where all this leads to, but so far that hasn’t been an issue.

In terms of my own succession, which I kind of don’t think about, it’s really a question for the board, a decision for the board and shareholders. I think the retirement age now is 65 in the U.K., so I guess you could say that 65 is the new 60 in terms of—

Lucas Herrmann – Deutsche Bank

That’s a change since Lord Brown’s day.

Bob Dudley

I think it is, yeah.

Lucas Herrmann – Deutsche Bank

I think he was regarded as sexist—or not sexist, sorry, ageist.

Brian Gilvary

I think you’re now being rather Freudian, Luke! The U.K. law has changed since then and it’s gone to 65.

Bob Dudley

Yes, you are sanctioned with that comment.

Lucas Herrmann – Deutsche Bank

Okay, I’ll accept the sanction. Gentlemen, thank you.

Bob Dudley

Thanks Lucas.

Jessica Mitchell

Thanks Lucas. Richard Griffith of Canaccord, are you there?

Richard Griffith – Canaccord Genuity

Yes, hi. Good afternoon gentlemen. Just one quick question. It was the comment earlier you made about Whiting in the second half, and I think you may an aside about a pipeline from Enbridge. I was wondering if you were referring to the Flanagan South, and if so, does that affect your view on the competitiveness of the Gulf refineries versus Whiting for the heavy oils, and would that change any scenarios for Whiting?

Brian Gilvary

No, I think you’ve read too much into the comment. There were one or two logistical issues towards the end of the quarter around one of the Enbridge pipelines, some curtailment on it, but if you look at it long-term, even medium or short term, it’s still a very attractive location for what are discounted crude oil that will come down through those lines from Canada, and you’ve seen that happen more recently with the blowout in the spreads out to $26, so no. It still is the most—you would assume it would still be the most obvious place for Whiting to take its crude oil; however, that said, we would have options to move crude oil from the Gulf Coast is we needed to.

Richard Griffith – Canaccord Genuity

Okay, thanks.

Jessica Mitchell

Thank you, Richard. Now Neill Morton, you’ve been waiting very patiently – thank you. Are you still there?

Neill Morton – Investec

I am indeed, Jess. Thank you very much and good afternoon everybody. Two quick questions. Firstly, you mentioned a couple of times that post-tax proceeds from the disposal program would find their way mainly towards share buybacks. I just wondered, is it fair for us to assume that we can apply your average or typical corporate tax rate when calculating a post-tax number? And then just secondly on Macondo litigation, on what basis are you trying to avoid being fined under the Clean Water Act? What’s the legal argument? Thank you.

Brian Gilvary

So on the first question, Neill, I think you should assume something around our cash tax rate—it depends on what the assets are, but something around 20%, 20 to 25% is a reasonable assumption, so it’s actually it’s about 7 or 8% below our corporate tax rate of the 33, 35%. So something around 20 or 25 is probably a reasonable assumption going forward, so around $7.5 billion to $8 billion to be able to be used around distributions.

Bob Dudley

And Neill, on your question on Macondo and trying to avoid being fined, we are not trying to avoid being fined. What we believe is legitimate, fair and reasonable fines is fine. Part of the calculation of the fines also includes response effort, effort taken by a company with the Clean Water Act related to clean-up itself, cooperation with the government. I think we demonstrated having helped and funded 48,000 people working on the Gulf, our cooperation with the government throughout, the Coast Guard and the efforts that we’ve made to clean up are certainly part of the consideration of fines. So we think that effort is really very legitimate.

We do not believe that we were grossly negligent, which implies some sort of willful negligence in the accident, and we vigorously defend that and don’t think that we or any of the parties, really, involved were grossly negligent, and that also could have an impact on the fine. So I think it’d be overstating to say we are trying to fight—avoid being fined. We just would like them to be representative and reasonable.

Neill Morton – Investec

Yeah, I was just referring to a recent appeals court ruling that both you (indiscernible). It seemed to imply that you were trying avoid automatically being liable under the Clean Water Act. Am I sort of misunderstanding my limited knowledge of U.S. legal systems?

Bob Dudley

Well, it’s a pretty baffling system sometimes. I think—yeah Jess, you seem to know something about it. There’s lots and lots of motions being filed by various companies on the details of—

Jessica Mitchell

Yeah. Neill, I think this is a complicated issue about where the oil flowed from, and it goes back to some previous legal proceedings. But if it’s okay with you, it’s been a long call. Maybe I’ll pick that up with you afterwards.

Neill Morton – Investec

Absolutely. Thank you very much.

Bob Dudley

Yeah, I think what you—you just made a note there. It’s something around whether the well—it flowed from the vessel or the well head, and it’s a clarification on that.

Jessica Mitchell

Yeah, we can pick that up. So thank you, everybody. I think that’s the end of our questions. It’s been a long call. Thank you for your patience and thank you to all those that have stayed with us. Are there any final remarks you want to make, Bob?

Bob Dudley

Well, very quickly – again, thanks for your—it has been a long call. Thank you very much for your patience around the world, we do appreciate it. We like your questions. It gives us insight into what you’re thinking about, and I do think putting aside all this activity and the news flow around Russia, actually what you see in the results is a quarter that’s kind of doing what we said we would do. We hope to do that next quarter as well. Thank you all.

Jessica Mitchell

Thank you.

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