BPE5.DEBPE5.DEXETRA
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Craig Marshall: Good afternoon and good morning, everyone, and thank you for your interest in BP's Full Year 2025 results. I'm delighted to welcome our guests in the room and those on the webcast. I'm joined today by Carol Howle, Interim Chief Executive Officer; Kate Thomson, Chief Financial Officer; and Gordon Birrell, Executive Vice President, Production and Operations. Before I hand over to Carol, let me draw your attention to our cautionary statement. In this 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 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. And with that, over to you, Carol.
Carol Howle: Thank you, Craig, and it's a real privilege to be here as Interim CEO ahead of Meg O'Neill's arrival as Chief Executive Officer at the beginning of April. And on behalf of the entire BP team, I do just want to take this opportunity to thank Murray for his 34 years of service, his leadership and contributions to the company. So stepping back for a moment, as we started 2025, it was clear to us that this was a year of turnaround. We hadn't been performing as strongly as we should have been, and that required urgent and focused intervention. And we have made good progress in 2025 to address that. Kate, Gordon and I will spend around 30 minutes talking through our performance highlights and delivery of our plan. And we know we've got more to do. So we've got more to do to accelerate the delivery and to position the company for the future opportunities that we have ahead of us. And the team and I have great conviction in our potential to deliver significant growth in shareholder value. And from my 25 years in BP, I know we have fantastic assets, and we've got exceptional people. Our strategic direction is right. We've made a good start in delivering against the plan that we laid out 12 months ago, and I just want to thank everyone at BP for that delivery. And as I said, we look forward to Meg joining in April. She's an outstanding leader. And together as a leadership team, we're going to continue to drive forward our strategy in accelerating the turnaround of this great company. Now Kate run through some of the highlights on the video at 7:00 a.m. So I'll just recap a few of them. Our operational performance was strong across the group. Reported upstream production was lower than 2024, which reflected portfolio changes, but underlying production was held broadly flat, and we've exceeded our annual guidance from 12 months ago. We set new records in upstream plant reliability and refinery availability with both above 96% for the year. We started up 7 major projects and our reserves replacement ratio was 90%, up from an average of around 50% in the previous 2 years. Based on provisional data, our operational emissions in 2025 were 37% less than in 2019, a reduction well in excess of our 20% target. Our supply trading and shipping business remains a distinctive competitive advantage for BP, delivering an average around 4% uplift to BP's returns, which now extends over the past 6 years. We concluded the strategic review of Castrol with an agreement to sell a 65% shareholding, and we believe the sale and the retention of a position in Castrol represents a very good outcome for shareholders. It allows us to realize value today while continuing to benefit from future growth of that business. And in 1 year, we've completed and announced over $11 billion of our $20 billion divestment program. Let me now turn to safety, our #1 priority. Our commitment to our safety goals is unwavering. It's to eliminate fatalities, life-changing injuries and Tier 1 process safety events across our operations. Tragically, in 2025, 4 colleagues lost their lives while working in our U.S. retail business. Two were killed in separate incidents where they were struck by passing vehicles as they carried out emergency roadside assistance. In response, we've permanently stopped roadside assistance next to active traffic lanes, a decision made solely to protect the safety of our people. Our thoughts remain with their families, friends and colleagues of the 4 people who lost their lives. On process safety, we've seen encouraging progress. Combined Tier 1 and Tier 2 events are down by around 1/3 compared with the previous year. While process safety has improved, we recognize we have more to do. We must learn from every incident and every challenge to keep us safe today and tomorrow. Turning then to our primary targets, where we've made good progress this year. Kate will provide further details on each of them shortly, but the headlines are we increased adjusted free cash flow by around 55% in 2025 on a price-adjusted basis. Net debt was $22.2 billion at the end of last year, which is $800 million lower than at the end of 2024. We've now delivered $2.8 billion of our $4 billion to $5 billion structural cost reduction target since the start of the program, including around $2 billion in 2025. Going forward, we have increased this target to $5.5 billion to $6.5 billion, which includes the expected cost reductions from the divestment of Castrol. Kate will cover that shortly. And return on average capital employed was around 14% in 2025 on a price-adjusted basis, and that's up from 12% in 2024. So we are executing our plan. We're taking decisive action on costs, capital and portfolio. And that, combined with the Board's decision to suspend the share buybacks and fully allocate excess cash to the balance sheet, that will create a strong platform to invest with discipline into our deep hopper of oil and gas opportunities. In the near term, this is supported by 3 more major projects that we expect to bring online by the end of 2027 with 6 more projects sanctioned. We're on track to bring a further 8 to 10 projects online between 2028 and 2030. And as we look to the long term, our success in exploration and access in 2025 has created a real sense of excitement around the company and around the opportunities that we have ahead of us, including in the Middle East, Brazil and Namibia. And there's more to come with planned exploration wells this year, including in Libya, Angola, Brazil and the Gulf of America. So we see potential to drive disciplined organic production growth over the longer term, underpinned by our distinctive resource hopper and our capability, our people, our technology, our experience, and that will maximize value for our shareholders. So more on that from Gordon shortly as well as the significant progress being made by the team in the downstream, which I'll cover and come back to later. But for now, let me hand over to Kate.
Katherine Thomson: Thank you, Carol, and good afternoon, everyone. It's great to see you all here. Thank you for joining us. We covered our fourth quarter and full year results in the video released earlier today at 7:00 a.m. U.K. time. So I'll just do a quick recap of the headlines here. We generated underlying replacement cost profit or net income of $7.5 billion in 2025 against the backdrop of a weaker price environment. This result was underpinned by strong operating performance, which Carol already highlighted. Operating cash flow for the year was $24.5 billion, including an adjusted working capital build of $2.9 billion this year. We improved capital efficiency and tightened further our discipline, delivering full year CapEx of $14.5 billion, including a reduction of organic CapEx to $13.6 billion. For 2025, including the fourth quarter dividend announced this morning, shareholder distributions for the year were around 30% of our 2025 operating cash flow and within the guidance issued last February. As mentioned in this morning's release, the guidance for shareholder distributions is now retired, but the dividend remains our first financial priority. As we guided in our trading statement, we recognized impairments of around $4 billion after tax this quarter. These impairment charges are largely related to our transition businesses, including biogas and renewables, where we took decisive action to manage our pace of growth and to high-grade our portfolio to maximize returns. While these are noncash adjustments in our financial results, we do recognize that every impairment reflects a prior capital outlay. We're committed to doing better for our shareholders on capital allocation, driven by a disciplined and rigorous focus on returns as we progress only the best opportunities from our hopper. Now I'd like to provide more details on the progress we've made on our 4 primary targets in 2025. We're 4 quarters into our 12-quarter plan, and we've made a good start, and we are focused on accelerating wherever we can. If I start with adjusted free cash flow, we are progressing ahead of our target for greater than 20% compound annual growth through 2027. On both a reported and a price-adjusted basis, we generated around $13 billion of adjusted free cash flow. Our targets are presented on $70 per barrel at 2024. So on a price-adjusted basis, this represents around a 55% growth from last year. This achievement was supported by interventions made on CapEx, the significant improvement in downstream operating cash flow generation and good progress in the Upstream. Moving on to return on capital employed. On a price-adjusted basis, return on average capital employed increased from around 12% in 2024 to around 14% in 2025. We remain confident in achieving our price-adjusted target of over 16% in 2027. Moving to costs, where we are fundamentally shifting the cost performance culture right across the organization to safely achieve top quartile wherever possible. In 2025, we delivered around $2 billion of reductions, a material step-up from 2024. This brings cumulative reductions to $2.8 billion to date. That's equivalent to around 60% of our $4 billion to $5 billion target by 2027 versus the 2023 baseline. Reflecting the recently announced outcome of the Castrol strategic review, we now expect to deliver structural cost reductions of $5.5 billion to $6.5 billion by 2027. And as a reminder, this doesn't include any expected additional savings from the intended sale of our Gelsenkirchen refinery. Importantly, our cost reductions have more than offset around $2 billion of costs related to growing our business and environmental factors such as inflation, resulting in underlying operating expenditure reduced by over $700 million since 2023. Looking ahead, we plan to deliver a further $1.2 billion to $2.2 billion of structural cost reductions. After taking account of an assumption for inflation and growth costs, we expect to see an acceleration in the reduction of our underlying operating expenditures from now through to 2027. Taken together, this means underlying operating expenditure could reduce to around $19 billion to $20 billion by 2027. Based on cost benchmarking and competitive analysis, we believe we're making good progress. We're ahead of plan in some areas behind in others, but overall on track. In Oil and Gas, the business has maintained its top quartile cost position, keeping unit production costs at around $6 per barrel on average over the last 4 years. This is supported by the delivery of around $600 million of structural cost reductions in 2025, offsetting inflationary pressures and business growth costs. Not all of our operated regions rank us top quartile on cost, and we are in action to safely address this. In customers, over the last 4 years, our cost performance benchmarked in the middle to lower quartile range. And as a result, we laid out a target at the CMU to lower our total cash cost to gross margin ratio by over 10 percentage points by 2027, and we are now halfway there. We delivered $700 million of structural cost reductions, which contributed to this improvement. We believe this brings us up to the higher end of the second quartile, and we are in action to be firmly within top quartile by 2027. Turning to areas of our business where we have more to do to safely reduce our cost base. In refining, we have a target of sustainably reducing our cash breakeven by $3 per barrel by 2027. That's equivalent to around $1.5 billion of additional cash flow. This year, we delivered around 80% of our cash breakeven target, mostly through commercial optimization and improved availability. Structural cost reductions also contributed around $300 million this year, driven primarily by optimization of maintenance and supply chain efficiencies. We need to continue to safely lower costs to improve our competitive positioning and underpin our aim of being first quartile margin per barrel and second quartile refining cost per barrel in 2027. Within group central functions, our 2025 cost base needs to improve to reach top quartile. We are already in action when we saw an 8% reduction in '25 through initiatives such as reducing headcount in higher-cost locations, leveraging strategic third-party partnerships and simplifying processes and driving digital efficiencies throughout the businesses. We expect to see the contribution from these actions to increasingly show up in our 2026 results, and we are working to drive to top quartile on average across our functions. Turning next to our target to strengthen the balance sheet. This is key to enabling us to manage and grow the business through the commodity cycle. We continue to target net debt to be in the range of $14 billion to $18 billion by the end of 2027 and have visibility to moving into that range with the expected closing of the Castrol transaction. In 2025, operating cash flow and divestment and other proceeds was $30.4 billion. I would note that this is after paying $1.2 billion towards the Gulf of America settlement liability accounted for in our working capital. Our uses of cash, including $1.2 billion to redeem hybrid bonds, came to $29.6 billion. So overall, this led to an $800 million reduction in our net debt. As we look ahead, we are seeking to accelerate the strengthening of our balance sheet, not only to allow us to more easily tolerate commodity cycles, but also to drive higher free cash flow for our shareholders. We look beyond financing debt when considering our capital structure. We also consider financial obligations, including hybrid bonds, leases and Gulf of America settlement liabilities. At the end of 2025, these financial obligations added up to around $58 billion. Looking ahead and as we consider sources and uses of cash, out of the $20 billion divestment program announced last February, we've received $5.3 billion in 2025. The remaining $15 billion is underpinned by the $6 billion anticipated proceeds from the Castrol transaction and a deep hopper of quality assets that we continuously high grade. In 2026, we expect this to result in another $3 billion to $4 billion of divestment proceeds. All proceeds in 2026 are expected to be heavily weighted to the second half of the year. Turning now to uses of cash, and I'll start with dividends, our first financial priority. You can expect these to increase by at least 4% per year. Today, we announced a dividend per ordinary share of $0.0832. We, of course, continue to pay down the Gulf of America settlement liability through to the end of 2033, but the liability is largely settled by the end of 2032. In 2026, our gross payment is around $1.6 billion and in 2027, around $1.2 billion. After adjusting for changes related to tax amounts, the net liability is expected to be around $4 billion in 2027. We also continue to manage leases, hybrids and finance debt to optimize finance costs. Leases give us flexibility in relation to assets we choose not to own directly. With regard to hybrids under the S&P rules, we currently receive 50% equity treatment for the $12 billion issued during COVID in 2020. Within these rules, we can reduce the stack by up to 10% in any 1 year, up to a cumulative reduction of 25%. We intend to remain within these limits while, of course, continuing to manage maturities proactively. Moving on to CapEx. We have exercised discipline in capital allocation, investing in only the highest returning opportunities across the portfolio and pacing investment more deliberately. We've tightened our 2026 CapEx range to a range of $13 billion to $13.5 billion, and that's at the low end of the range we previously guided through to 2027. Spending this year will be slightly weighted to the first half. All these actions, together with the Board's decision to suspend share buybacks and fully allocate excess cash to the balance sheet are in service of optimizing finance costs and accelerating the improvement in free cash flow. Let me now hand over to Gordon.
Gordon Birrell: Thanks, Kate. I'd like to spend a few minutes walking through the progress we've made in safely growing the Upstream over the past year. 2025 was a strong year for project execution as we started 7 major projects out of the 10 we expect to bring online between 2025 and 2027. Five of these were ahead of schedule. And we've now started up around 150,000 of the 250,000 barrels of oil equivalent per day net peak production that we expect to have online by 2027. This includes projects such as GTA in Mauritania and Senegal, [ SIP ] in Trinidad and Murlach in the North Sea. Delivering major projects takes focus and drive. We've encountered and overcome some challenges in some of our projects along the way. And I'm extremely proud that according to the most recent IPA benchmarks, we are ranked best overall -- ranked best-in-class overall for our projects starting up and staying up. Furthermore, of the wells that we drill, many as part of major projects, around 3/4 are in the top or second quartile. As mentioned by Carol, based on provisional data, our operational emissions in 2025 were 37% less than in 2019, a reduction well in excess of our target of 20%. Our methane intensity, again, based on provisional data, fell to 0.04%, thanks to improved operational performance, significantly below our 2025 target of 0.2%. You also heard from Carol that we had record plant reliability in 2025 of over 96%. We also had wells reliability of almost 98%. We saw strong base delivery, decline management and turnaround execution with standout examples, including ACG in Azerbaijan and Argos in the Gulf of America. This helped to keep our managed base decline comfortably within the 3% to 5% range. This level of operational delivery is a direct result of the years of investment we've made in world-class capability and cutting-edge technology. This has been a key differentiator for us, and we're not standing still. We're expanding the use of dynamic digital twins, AI and automation across the business. This includes real-time reservoir wells and facilities monitoring and optimization. These have played a key role in helping to increase BP operated production on average by around 2% every year for the last 5 years, while also protecting on average around 4% more from going off-line. The delivery of these elements enable us to beat our 2025 production plan. Furthermore, 2026 production, excluding divestments, is now expected to be around 2.3 million barrels of oil equivalent per day, broadly flat compared to 2025. This is an increase compared to the outlook we gave you this time last year. We're also working hard to strengthen our resource base. 12 months ago, we set a target to achieve 100% reserve replacement ratio by the end of 2027 or said another way, that we'll book around the same amount of proven reserves that we produced. We're making good progress towards that target. As a result of the strong operational delivery and project execution that I just described, in addition to some benefit from higher prices, we have increased our 2025 organic reserve replacement ratio to 90%. We have a high-quality pipeline of major projects due online between 2028 and 2030, including Kaskida and Tiber-Guadalupe in the Gulf of America, Shah Deniz Compression in Azerbaijan and Tangguh UCC in Indonesia. These 4 projects alone are expected to add another 250,000 barrels of oil equivalent per day of higher-margin net peak production. And I'm particularly proud of our exceptional year for exploration with 12 discoveries in 2025, including in the Gulf of America, Namibia and, of course, Brazil. People ask me, what's behind our exploration success? My response is that it is a blend of a deeply experienced exploration team and the application of advanced technology. We have examples where the combination of seismic technology with high-powered computing and advanced algorithms has enabled us to light up the subsurface by creating images with unprecedented clarity. Our capability and technology have also been important factors in being selected to help governments develop their discovered resources, such as in Kirkuk in Iraq and Karabagh in Azerbaijan. This combination of our exploration success and discovered resource access is enabling us to reduce -- to reload our resource hopper. And others are also acknowledging the progress we've made to strengthen our resource base. When benchmarked using [ WoodMac ] data, we now have the second longest remaining resource life of the majors. In summary, we believe that our deep resource base is a real competitive advantage. It creates what we call quality through choice. It provides the potential for long-term organic growth and combined with disciplined investment criteria, enables us to progress the most value-accretive options with the highest returns. Along with our high-quality assets, outstanding capability and advanced technology, we believe this is distinctive and a key differentiator supporting the BP investment case. I'd like to finish by providing an update on the exciting Bumerangue discovery in Brazil, our largest find in the last 25 years. We're making good progress. The in-situ analysis is materially complete, and our initial estimate is that there is around 8 billion barrels of liquids in place, split roughly 50% oil and 50% condensate. As is normal at this stage, there is a wide range of uncertainty around this estimate. We've appointed senior leadership and are currently working on design concepts, including the potential for an early production system. We're also putting plans in place for an appraisal program, which we expect to start around the end of the year. This will use the Transocean's deepwater Mykonos rig following the drilling of our Tupinamba exploration prospect in a neighboring block. This will provide us with data from locations across the reservoir to enable us to describe the fluid characteristics and resource potential. As you can see, we're in action with confidence and our excitement in this huge opportunity is growing. With that, I'll hand back to Carol.
Carol Howle: Thanks, Gordon. And yes, a lot of great progress in the Upstream. And it was also a strong year for the Downstream, having delivered a significant step-up in performance. We continue to optimize our cost base safely with around $1.6 billion of structural cost reductions delivered to date. And customers delivered their highest underlying earnings since 2019 with all businesses growing year-on-year. And our approach to investments in our refineries in midstream has created the ability for us to consistently run the kit above 96% and capture that margin. And we're also progressing our business improvement plan at TA and the commercial integration of our BP Bioenergy acquisition is now complete. We're also in action to focus our portfolio on our leading integrated businesses, having announced the sale of Castrol, completed the sale of [ Netherlands Retail ], and we continue to progress the intended sale of our refinery, Gelsenkirchen and Austria Retail as well. So let me just close now before we turn to questions for the next 45 minutes or so. We've reflected today on where we've come from as a company and the really good progress we've made in 2025. And we know we need to accelerate delivery in every dimension of our reset strategy. And we're resolute on what our focus needs to be for BP. We need to build on a good year and operate well consistently quarter in, quarter out. We need to accelerate the strengthening of the balance sheet, which includes taking the decision to suspend the buyback and delivering the $20 billion of the divestment program. Our discipline on capital allocation is key, and we must continue to simplify our portfolio. We've made progress in addressing that in 2025, and it will remain the central focus for us going forward. We've also made good progress on our cost base, and we're in action to take our businesses and functions to top quartile by the end of 2027. And all of this must be in service of materially improving cash flow and returns and value for our shareholders. And as we look ahead, we have a portfolio of world-class assets and the richest set of organic opportunities for growth that we've had in many years. The Board and the leadership team are aligned around our goal to become a simpler, stronger and more valuable company and in turn, grow shareholder returns. We're in action. We do have more to do, and we can and will do better for our shareholders. With that, we go to Q&A.
Craig Marshall: Okay. Super. Thank you, Carol, and thanks, everybody, for listening to our remarks. What we're going to do is, as usual, take one question, please, from those in the room and those online. We'll certainly come back to everybody if there's time and an extra question, I can assure you. And we will aim to finish by around 2:30 U.K. time here. So Michele, you are quick off the mark there, so we'll turn to you first. And if I can just ask everybody to say their name and the company they're with, please. Thank you.
Michele Della Vigna: Michele Della Vigna from Goldman Sachs. Thank you very much for the wealth of information provided today. I wanted to come back to the finance cost. I think it's very helpful to look at all of the different sources of debt and to lay out the $15 billion reduction. I was wondering what does it mean in terms of reduction in actually the finance cost by 2027? How much could we expect that to go down by then?
Katherine Thomson: Yes. Thank you for the question, Michele. And I understand, of course, why you're asking that. Look, what we've tried to do today is be utterly transparent on the totality of the financial obligations that we are managing. And I think it underlines the imperative to do something now to really strengthen our balance sheet and make a step change in the pace at which we do that in service of growing free cash flow. There are a couple of elements that it's worth just calling out. So the Deepwater Horizon obligation, that is a payment that we will make each year. This year, it's $1.6 billion next year, it's $1.2 billion, then it's materially complete by the end of 2032. And then we turn pretty much to hybrids and debt. We've got a net debt target of 14% to 18%. That is our first priority. And we are determined to deliver that. We've got line of sight to it now. And we will, of course, be stepping through that as we go through the year and we get proceeds in. I'm very cognizant of the S&P limitations on hybrid, the 10% in any 1 year up to a cumulative of 25%. Having said all of that, I think it's incumbent on us as we have excess cash to make the very best economic decisions in terms of how we deploy that. You can do the rule of thumb based on what you can see our current financing costs are today to have a sense of what a $15 billion total reduction could look like by 2027. The actual reduction will obviously depend on the choices that we make as we deploy that excess cash. But this is ultimately about materially changing the total financial obligations we are servicing and as a consequence, drive higher free cash flow and position us strongly to have the best opportunity to develop the set of organic options that we have ahead of us, which are unique.
Craig Marshall: Thank you, Michele. We'll go to Martijn Rats just in the second row there, please. Martijn?
Martijn Rats: It's Martijn Ratz of Morgan Stanley. I want to sort of ask a question about the dividend. The guidance for growth in dividend per share is still 4% plus. But when the buyback was still there, you could say, well, like a good couple of points of that actually does come from the share reduction -- share count reduction from the buyback. So in many ways, there is a little bit of an underlying upgrade in the outlook for the total dividend burden of the company. And I was wondering if there's a sort of the fact that you removed the buyback but capped the dividend growth. Is there also a signal in there that there is confidence in the long run? And is that something that I'm interpreting correctly here as in like -- because you could also said, look, most of the dividend growth actually just come from the buyback -- share count reduction. But despite that, we are keeping the dividend growth on track.
Katherine Thomson: Yes. I mean, mathematically, you could reach the conclusion you've outlined, Martin, I completely agree with you. I think it's really important we have a progressive dividend, and we've been really clear only a year ago that that's a 4% increase per annum and the Board is comfortable. We want to retain that. That's the first priority in our financial frame. Beyond that, it's about building back the balance sheet and then investing for growth. Yes, the flywheel for share count reduction has changed with the decision around the suspension of the buyback. But I think one of the things that Meg and I will need to step through when she comes in, in April is contemplate what sort of balance sheet we want that is in support of the growth options that we have ahead of us, and we'll need to step through that. But for now, the financial frame is clear. The only thing we are altering is we are suspending the buybacks and putting all of that excess cash against strengthening our balance sheet. The dividend, the 4% growth per annum is exactly what we want to maintain right now.
Craig Marshall: I'm going to go over to this side. Chris Kuplent, please.
Christopher Kuplent: Chris Kuplent, Bank of America. I've got another one for you, Kate. You showed the performance in 2025 in most respects was well ahead of targets you laid out 12 months ago. So I wonder whether you could talk us through the decision-making tree, why in the end, you decided to suspend the buyback.
Katherine Thomson: I don't know that it's as complicated as a tree actually, Chris. I think this is just strong financial discipline. Over the last year, we've created a materially different hopper of options in terms of future earnings growth. And now the right decision to take is to strengthen our balance sheet to give us the foundation from which we will access that. And it will also create a degree of choice over how much of that we continue to hold as working interest. You know that we have significant growth opportunities in the Paleogene in Brazil, there's others in Namibia. We currently hold Paleogene in Brazil 100%. And at some point, we can make choices around how much we may want to dilute. The strength of the balance sheet that we have will allow us to make choices that are positioned to enable us to capture maximum shareholder value. So I don't think it's as complicated as a decision tree on the balance sheet. This is just about the right decision now to take an action that materially increases the pace at which we strengthen our balance sheet and gives us that foundation for the future.
Craig Marshall: Okay. I'll stay on this slide, Josh.
Joshua Eliot Stone: It's Josh Stone here from UBS. I'm going to come back to the use of cash, if that's okay. I think you've taken a very brave decision to spend the buyback, and I think ultimately the right decision for the reasons you've laid out. One thing that's not very clear, though, is where -- at what point would you feel more comfortable to reinstate the buyback program? Is it a case of having to wait for a new CEO to sort of decide that leverage level? Do you have some views yourself of at what point the leverage level would be appropriate for BP to be able to buy back its own stock?
Katherine Thomson: Thanks, Josh. I'm sure at some point, someone is going to ask a question of Carol and Gordon here on the panel as well. When will we reinstate? You can see from the sort of pro forma impact of the remaining divestment proceeds, what we think that the order of magnitude could be as we deliver the remaining $20 billion over the next couple of years. So I think there's an opportunity to deliver a materially stronger balance sheet. I'm probably going to repeat myself a couple of times this afternoon, so please bear with me. I think it's really important that Megan and I have the space with Gordon and the team to go through the hopper of options that we've got in terms of our growth looking ahead. We've got an incredibly powerful set of organic growth that we've created through the drill bit that's more value accretive than going and buying barrels. And we need to consider those and think about how they rank and which ones we invest in what order of priority. Once we're clear on that, then I think we can decide what sort of balance sheet we need to support that. And I think it's important that we have the time and space to do that. For now, what we're focused on is delivering the net debt target, the $14 billion to $18 billion. And once we have delivered that, then I think we'll be in a position to update you, but I'm not going to suggest when that may or may not occur right now. We've got plenty of things to step through.
Craig Marshall: Go back over this side, Doug.
Douglas George Blyth Leggate: Thank you. I think folks have flogged the financial question, Kate, a bit. So I will turn to Gordon, if I may. Gordon, you gave a few hints on Bumerangue, obviously. I wonder if I could ask you just to give us a few more hints. The recoverable number is pretty critical to the outlook for Bumerangue. You've talked about high-quality rock -- rule of thumb, I would say, 40%. Could you give us an idea of what you're thinking and what working interest would you be prepared to go forward with an early production system? I'm sorry, it's Doug Leggate from Wolfe.
Gordon Birrell: Doug -- thanks for the question. Let me take the equity question first. We're in -- it's early days, and we're in no rush to take a partner. When we do take a partner, it will be the right partner for value and the right partner who can bring something to the table to help us develop this field. We're not putting out a recoverable number right now because I'd like to understand a bit more across the reservoir, what the variability is across the reservoir, if nothing else, before we put any more numbers. I remain excited by it. There's nothing I see that has diminished my excitement about this field at 100%, 8 billion barrels in good terms to develop on. So we're going to do the appraisal program early next year. That will enable us to lock down a development concept at that point in time. But just as a reminder of what we did put out there last year that should take you a long way to figure things out, Doug, would be 1,000 meters of hydrocarbon column, 900 condensate, 100 oil. And we did say the gradient across the rock was consistent, which would tell you it's well connected in the vertical sense. And we told you it's 300 kilometers square. So there's a reasonable amount of data out there and there are reasonable analogs out there, I would say, but we're not going to put a recoverable number out until we get a little -- we reduce that uncertainty range down to something that we're more comfortable with. Well, it could be a wide range. I'm comfortable for the moment at 100. We'll find the right partner and we'll come down. But it's material for our company, and it really -- and the terms are good. So we'll retain a very significant proportion of this field.
Craig Marshall: Thank you, Doug. Lydia.
Lydia Rainforth: It's Lydia Rainforth from Barclays. I'm going to come back to capital discipline. What's different this time? And we've talked -- the Board have talked about needing more rigor, more diligence. Kate, you referenced that there have been write-downs and impairments. And you're all very compelling at that. There's lots of opportunities. But how do you -- has anything changed in that capital allocation process? What's different? How do investors trust that you're going to make the right decisions going forward?
Carol Howle: I think let me start on that and see whether you want to jump in, Kate. So there has been a real cultural shift in cost and discipline in BP. And I think you'll have seen that from the results from 2025 in terms of the progress around cost reductions, I think also capital productivity, and Gordon can give some great examples around that productivity efficiency gains that we're seeing on the production side. We know that every dollar has to compete within the portfolio. We're very much focused on that. We're only going to be investing in the very best of opportunities. It's what we are holding ourselves to account on. So everything needs to compete, and that's why we made some very difficult portfolio decisions last year, and we'll continue to review the portfolio and make those right commercial decisions going forward.
Katherine Thomson: I guess the only other thing I think I absolutely agree with you, Carol, is as a leadership team, we know how important this is. It's got a huge degree of focus, and we know we need to get this right. You've seen a significant structural shift for us in terms of strategy. We know that we went too far, too fast a number of years ago. But as we take investment decisions today, we are focused very hard on interrogating the level of confidence that we've got on the returns, testing hard the downside risk as we take every single investment decision. And I think in time, that will show up with less impairments. Of course, you're always going to have impairments that are driven by environment around you. I hold those slightly differently to impairments that you could argue are a consequence of capital allocation. But the impairments that we've taken in 4Q are a direct consequence of a deliberate decision to tighten the capital that we're deploying and the pace at which we're deploying it to maximize returns and shareholder value in terms of cash flow.
Craig Marshall: Gordon, do you want to talk capital efficiency?
Gordon Birrell: Yes. Just a plug for the teams out there doing it every day. I mean, some tremendous real examples of capital productivity in Azerbaijan and ECG and Atlantis, we're drilling these long undulating horizontal wells with geo-steering -- so a significant reduction in dollars per of rock contacted. In BPX in our Lower 48 business, 20% improvement in completion time, 9% improvement in drilling time. So in Lower 48, we can unlock the same amount of resources in a year using 8 rigs that used to take us 10 rigs. So that's real capital productivity coming through, which means there's less capital required to hit our targets means we can allocate capital elsewhere. So the capital productivity drive that we've been on for a number of years is starting to come through to the bottom line in terms of activity.
Craig Marshall: Thank you. I'm going to go to the forward and I'm go to this side of the room. Paul Cheng at Scotia. Paul, can you hear us?
Paul Cheng: If I could, Kate, on the $5.5 billion to $6.5 billion on the cost reduction target increase, how much does that relate to the sale of the Castrol interest? And also, when you look at, say, cumulatively, you're talking about $2.8 billion of the savings. Can you break down between portfolio impact and the actual cost saving?
Katherine Thomson: Yes. Paul, thank you for your question. In terms of the change in the target, we've added $1.5 billion on to the $4 billion to $5 billion just to reflect the transaction on Castrol. So hopefully, that's fairly straightforward. With regard to the $2.8 billion that we've delivered today to date rather. You may remember when we set this target out there, we talked about probably around half of the savings coming from our supply chain and our third-party optimization. That's exactly the analysis that I've looked at in terms of that $2.8 billion. Half of it has come from supply chain and third party. And then of the remaining half, it's pretty evenly split actually between organizational optimization and portfolio. So that's the way to hold the $2.8 billion delivery so far.
Craig Marshall: Thanks, Paul. This slide, Alex.
Unknown Analyst: My question is about the remaining divestments you have until the end of '27, which are the priorities in terms of assets you want to sell in terms of the sectors, probably more in the downstream or you are counting on the farm down of some of the discoveries in '25 for this target? That's -- you can elaborate on that.
Carol Howle: So when we look at the portfolio, I mean, we're very much looking at it with regards to the best returns for BP, where could others see more value in certain assets than we do. And so we're looking at that as well. So we're looking across the whole portfolio across upstream and downstream and also into the low carbon business. At the moment, we do have under process the Gelsenkirchen refinery. We're looking at Austria retail. As you know, we've also got interested parties for Lightsource BP. So that will also be an area that we're looking at. And there are certain areas that we'll consider whether we farm down on them. I don't think there's a contingent decision. We don't need to. It's a question of what's the right decision for BP, for example, in our position in the Paleogene. So we're looking at each specific piece in the portfolio in terms of its value add to BP from a strategic perspective, the value for us, the value for our shareholders, and then we're weighing it up on that basis. Did I miss any, Kate?
Katherine Thomson: No. I mean we'll update you as we go. We've got a really good hopper in terms of depth and breadth of quality on assets. So we have plenty of choice, and we aren't in a rush. You can see we've said for this year, 3 to 4 on top of Castrol a typical level of just ongoing high grading of our portfolio of assets. We won't guide in advance where that's likely to come from. We will make those value-based decisions as we step through them.
Craig Marshall: Okay. Thank you. One more question, yes.
Mark Wilson: It's Mark Wilson from Jefferies. It's a really interesting setup because by 2027, when you've got your balance sheet down, you should have a concept development for Bumerangue. So Bumerangue clearly looms large in your future. I'd like to ask, firstly, does this just outweigh all the others? You've got 2 of the 12 total exploration discoveries. So just give us a pecking order there. And early '27 comes up very quickly. Are you telling us you would be happy to appraise this through '27 at 100% working interest?
Gordon Birrell: Let me just comment on the quality of our hopper. If you look at the WoodMac benchmarking, they're using our numbers, using their methodology, they give us 23 years of production at the current production level. That's the longevity we've created in the company through accessing discovered undeveloped barrels like Karabagh, like Kirkuk as well as through the drill bit with Namibia, with what we've done in Egypt, what we've done in Trinidad and what we've done in Bumerangue. So we have a very rich hopper of opportunities. So I won't give you a rank order, but clearly, Bumerangue has the potential to be very, very material for our company. And Brazil is a country we know well. We've operated there for many, many years in different types of businesses there. Namibia is very exciting. Of course, the discoveries are under the Azule brand, but we've drilled 3 wells there, 3 exploration wells in Block 85 and 2 discoveries, 2 nice discoveries, liquids, good quality rock, good quality fluids. So I would expect them to come to the fore rather quickly. And then we have our ongoing program in Trinidad, which we like as well. So there have been a number of discoveries in Trinidad that will push close to the front of the queue, I think. And then, of course, in Azerbaijan, we've got Karabagh, which is discovered, undeveloped that we also are working hard on to make that into an economic investment. So I wouldn't put any rank order on them. They will all compete on the day based on their economics. They won't all get funded for sure. and we'll back to quality through choice, as I mentioned earlier. Your question about would we go through the full appraisal phase as 100% BP, we could. If we have a partner before then that would add value to BP, then of course, we would take a partner. So I'm not 100% committing to it, but we're -- as I mentioned earlier, we're in no rush to take a partner. It has to be for value here.
Craig Marshall: Thanks, Mark, for your question. We'll go over to the side, Biraj.
Biraj Borkhataria: It's Biraj Borkhataria, One of the things I was struggling with the morning was reconciling the net debt target, which was unchanged with the buyback cut. You're obviously cutting CapEx as well, you're cutting OpEx as well. So just trying to understand the moving parts there. I know you're going to potentially redeem some of the hybrids, so that will put upward pressure on that number. But a couple of other moving pieces. Has your view on the ability to sell Lightsource changed? Because there's not -- I don't know how much equity value is there, but there's obviously a lot of debt associated with that. And secondly, could you just rationalize why you did a partial sell-down for Castrol rather than the whole thing, which I think was part of the original plan?
Katherine Thomson: I have one question or 3. I'll let you off Biraj. So I think your first -- maybe it was an observation as opposed to a question, which is the net debt target hasn't changed. No, it hasn't. I'd like to deliver the target and then we'll see. I'll just take the opportunity while I'm talking about that target again, just to make it clear, that is not an automatic trigger for us to reinstate the buyback. We need to take a holistic view of the balance sheet. We need to set ourselves up for the growth that we've got. And I think it's appropriate that we think about that very carefully before we start talking about it. Having said that, of course, we understand the share buyback is a tool for returning excess cash to shareholders. And we do need to think hard about the balance between investing for growth and returning to shareholders. For now, the imperative is strengthening that balance sheet, and we're utterly clear on that. A couple of things that also came through on some of the earlier questions in the room were around -- is the change in buyback something around confidence? There's something that I heard earlier on in the room, and you're asking a question around confidence in Lightsource. But I think one of the things that's important to iterate right now is you can see from the results we've printed today that actually our underlying performance is incredibly strong. So this is not a lack of confidence. If anything, I'm more confident in the delivery against our plan than I was a year ago when I stood up here. This is around creating the right strength. And on Lightsource, I think Carol mentioned it just a couple of moments ago, we've got a number of interested parties who are looking very hard at Lightsource, and we're working through that. And of course, we'll only transact for value. But right now, we're moving through that process, but there's no need to rush. And then on Castrol, we took our time to completely evaluate what a transaction around Castrol could look like. It's a great asset. It's a great business with a real future ahead of it in terms of earnings growth. And we came to the conclusion that the transaction that we signed with Stonepeak just before Christmas was the right transaction to do. It is a good value decision, a good value transaction, EV of $10.1 billion, and it gives us good multiples, I think 8.6x EV EBITDA, which is at least as good as, if not better than other precedent transactions. And on top of that, the retention of the 35% gives us the opportunity to share in future upside. So I think it's a good transaction for us and for shareholders, and it materially derisks that $6 billion against our balance sheet, which is really important.
Craig Marshall: Thanks, Biraj. We'll stay in this side. Irene.
Irene Himona: Irene Himona at Bernstein. Carl, I wanted to ask a question not as Interim CEO, but as Head of Trading. When you are adding to the portfolio, things like [ IKEA ], biogas and Lightsource renewables, you had expressed a sort of vision that by enhancing or adding more tradable products, the return from trading would thereby improve. And today, you disclosed a 4% enhancement to group ROACE from trading, which to me sounds sort of top end of the range you had given before. It used to be 2% to 4% or 3% to 4%. So I wanted to ask, is this 4% over the last 6 years legacy oil and gas? Or have these businesses which actually you impaired today, have they made any contribution to that profitability of trading?
Carol Howle: So thank you for the question, Irene. So we have delivered, as you said, 4% from Supply Trading and shipping for the sixth year in a row. And what I would just call out there is that, that's been through a number of commodity cycles through lots of different volatility sets. So what we have is a really competitively advantaged team who look at our BP business from the asset base. So I think we sort of said before, we look at what can we optimize and deliver from the asset base. That's around 2%. We look at around 1% from optimization and 1% from value trading. So within that, we do work, for example, with IKEA around routes to market and around the different types of channels, whether that's into utilities or into transport. So we support that. We've also supported working with refineries and with our oil and gas business, as you say. I think what we've seen is a real sort of change in, one, the BP portfolio, we've got such a rich set of opportunities at higher sort of levels of return, which means we need to make really difficult choices. So that's what you will have seen in Q4 around the IKEA impairment, for example. We're making difficult choices in terms of where we're putting our CapEx going forward because we see returns elsewhere. I would say we don't guide forward on the 4%. But I would say I think the capability and the experience within the team has meant that we can deliver that through a number of different opportunity sets, and we optimize the assets that BP has, and we will continue to do that going forward.
Craig Marshall: Okay. Thanks, Irene. We don't have any further questions online. So we'll stay in the room. Is that Al Syme?
Alastair Syme: Alastair Syme at Citi. I'm not sure I'm asking this. Can I ask about the Mona project? I appreciate it's under [indiscernible], but the decision to go forward on that development to leave Morgan, what's the sort of the time line? And how should we think about the financials given that you didn't get anything under the AR7 auction?
Carol Howle: So I'll say that is a JV discussion. So in terms of that decision to move forward with Mona. So I mean, I think it is a question for the JV. One thing I would say is, from our perspective, we're not looking at any increase or update in terms of what we said previously with regard to capital allocation to that JV. So that just remains consistent from what we said previously in case that was behind the question.
Craig Marshall: Thanks, Alastair. No questions on this side. I'm going to round 2 then. Lydia the front, please.
Lydia Rainforth: It's Lydia again from Barclays. I haven't asked a question about technology and AI, and particularly, it's one of my favorite topics. But when you think about sort of what you can achieve, the progress that is made on AI, and it won't just be cost, it will be recovery rates, et cetera. So can you just share your thoughts on the Agentic AI side?
Gordon Birrell: Yes. I'll -- let me have a go at that. The -- one of the things I'm particularly excited about is what we call Wells Advisors. So BP has been drilling wells for well over 100 years. So you could imagine the amount of learnings, data and knowledge that we have in our system, and that's a variety of systems. So we've now created an AI system where our well site leaders, the people on the rig who are making day-to-day decisions, facing problems, problem solving, they can access all that data through Wells Adviser, which is using AI as a platform. So huge benefits of that. The other one that we're doing right now, again, in the wells, I've got examples in every discipline, but I like the wells ones, I have to say, the kick detection. We monitor all our wells with an extra pair of eyes now from monitoring centers in Houston and in Sunbury. And we've put AI algorithms in place that we have small kicks tiny kits that the human may not detect on the rig floor. We're picking them up using AI. And with 90% success rate, we can detect small kits within roughly a minute. And that allows us to react before it becomes a problem, before you have to shut down drilling, before you have to shut the well and then circulate out that pressure, it allows you to react with weight on bit and mud weight. And it just allows the drilling to happen more smoothly. So there's lots of examples where we're doing that across every technical discipline in my shop with [indiscernible] and his team's help, of course, with the digital expertise, their AI expertise. So I think every function across the company has examples like that.
Craig Marshall: Super great. We'll go stay on this side, who definitely are the keenest with Lucas there, please.
Lucas Herrmann: Thanks very much, Craig. It's Lucas Herrmann from BNP. One perhaps -- well, for you, Carol or you Gordon equally, it's -- I'm listening to what you're saying, and there's a very rightful targeting of balance sheet, et cetera, and search to improve the balance sheet. And in doing that, obviously, you're taking away from equity holders in the near term and you're asking them to stay with you. And you're not giving equity holders a date whereby they might expect to see greater distributions from the company in line with many of your peers. So effectively, I'm sitting here and I'm thinking, well, what's the investment case around this stock? And increasingly, it comes back to, obviously, improvement, much of which though you've already stated and indicated, but it comes back to what you're trying to emphasize, I think, is growth. And okay, if I'm going to believe in growth, and the growth opportunity of your portfolio. What should I expect in terms of the continued release from you, demonstration from you around your opportunity set and why it is that I should accord a higher multiple effectively to this stock and your business going forward, given that in the context of immediate return, I'm really -- I'm not expecting very much over the course of the next 2 to 3 years, given the way you've defined and thought about balance sheet. I think there is a question in there somewhere. It's asking you effectively, please tell me what the investment case for BP is, whether that's an appropriate definition. But more importantly is how do you see the investment case for BP? Or should we just be waiting for Meg to arrive? And I know you've got your own views, but at that point, you formulate as a group. So I'm not trying to insult anyone. I'm just trying to understand.
Carol Howle: No, no, I completely understand. And look, let me just start on that last bit because I think what is clear, the Board and the leadership team, we're very clear that the strategic direction is right in terms of what we laid out in February. So we are focused on delivering that. We're focused on delivering the primary targets. We know that there's more opportunity there, and that is a good thing because we know that there is more that we can deliver. So we're focused on improving performance, improving competitiveness and, of course, doing all of that safely. So very much focused on that. We're in action. That doesn't change when make comes because that is our strategic direction. In terms of -- and I'll let Gordon speak sort of more deeply to the hopper. But we do have and the team has created the best set of opportunities from an upstream exploration access perspective that we've seen for a long time. So there is a lot of opportunity set there. As Kate said, it's created at the drill bit. We're not looking at going and buying expensive barrels in order to increase our reserves or to look at the sort of resilience and length of those reserves. So we believe we've got a differentiated portfolio versus our competitors. And our challenge is deciding how we access it, what's the best value for our shareholders and delivering the returns and making sure that we actually deliver on the major project execution success that we've seen previously. We brought these projects online last year, 5 ahead of schedule. That is significant capability. As Gordon says, IPA benchmarking, best-in-class for bringing projects up and keeping them up. So these are all things from a forward profile perspective that you can look to from BP delivery. But Gordon, do you want to.
Gordon Birrell: No. Thank you. And I'll just emphasize a couple of things. And Lucas, I would offer you reasons to believe short term, medium term, long term. Short term, the base is strong. What's online today, we're managing decline within that 3% to 5%. The infill program that we have that short-term barrels that pays the bills strong, rigs running very efficiently. 70% of the wells that we drill are first and second quartile. So short term, you've got an efficient machine that's bringing resource forward into production into cash. Medium term, I would say you've got BPX growing to 650,000 barrels per day of high-quality production, average returns across BPX at the moment, 45% IRR at $65 WTI, $3.50 Henry Hub. And then the Paleogene comes on in '29 through '30 and will ramp up. So that's the medium term. We've got strong medium term. And then longer term, you've got -- when I say longer term, early 2030s, I hope. We'll bring on Bumerangue, the Azule fields will start coming on in Namibia. There's more to go in Angola, and there'll be much more Paleogene to come on as well. We've got 10 billion barrels of oil in place in the Paleogene. The first 2 projects, Kaskida, Tiber-Guadalupe are only developing about $600 million. So there's a huge amount of running room in the Paleogene longer term. So there's a short-term case, medium-term case and long-term case. that I believe are reasons to believe.
Craig Marshall: Thanks, Lucas. And I'll just come back to what we said earlier, the simpler, stronger, more valuable BP. The simpler piece is the action we're taking on the portfolio. These are the right decisions to simplify the portfolio. It creates optionality. The stronger piece, which is about the cost we're taking out of the system, the opportunity there that we've got and also around really focusing that portfolio and the optionality that I think Gordon talks about. And ultimately, that more valuable BP is the piece around what can we do in combination as we try to drive that simplification and strengthening the company. So I think that real focusing discipline is something. And of course, we run the company, not just for the next week, the next quarter. These are around long-term value optimization decisions. And I think we feel like they're the right things to be taking. So I think come back to that simpler, stronger, more valuable piece. Maybe -- yes, Kim, sorry, I had a question from you.
Unknown Analyst: [ Kim Foster ] from HSBC. There's been a revival of interest in the MENA region from IOCs. And of course, BP was sort of early in this trend. I wonder if you could give us an update on early resource access and early-stage activity in places like Libya, Iraq, Kuwait. And also maybe just a word about your exploration plans in the Gulf of Mexico, where I think you accessed a lot of acreage in the recent license round.
Gordon Birrell: Yes. Let me just go to the Middle East first, Kim. So there is actually an exploration well we're drilling right now, Matsola offshore Libya that our exploration team is very excited by. It's probably the most watched exploration well in the industry right now. We spudded the well in January. It's a relatively short well. So we'll know the result of that one relatively quickly. And then, of course, in Iraq, we've been in Rumaila for many years, and that's been a tremendous success story. We've managed to hold production flat in Rumaila for many, many years. That led us to be invited into Kirkuk within the contract area, 3 billion barrels oil in place. In the bigger area, likely to be 20 billion barrels in place. So huge resources there. So we've made huge progress. And of course, Abu Dhabi, the P5 investment program that we've been putting our dollars into along with the partners onshore Abu Dhabi is showing up in terms of growth as well. So a huge amount of growth in our portfolio in the Middle East. Gulf of America exploration program, it's part of reloading the hopper. So our exploration hopper, we've been around the world and actively, like many companies, actively reloading our hopper. The Gulf of America, of course, an area that we know very well, been there for many years. And we've reloaded some in the Mayo scene, but mainly in the Paleogene. So that's created even more running room. The next exploration well in the Paleogene will be [indiscernible], which we will spud later this year, which could be quite an exciting tieback to Kaskida eventually. So again, creates longevity on that Paleogene opportunity that we have. So there's lots of running room in the Gulf of America, a lot in the Paleogene, still some in the Miocene that we've been producing from historically for many, many years.
Craig Marshall: Okay. We'll move over to this side, Maurizio.
Maurizio Carulli: Maurizio Carulli from Quilter Investment Management. First of all, well done for having cut the buyback. It was the right thing to do and probably you even managed to do at the right time. The question is past year, there were 3 important new appointment at Board level, Albert Manifold as the new Chair and the former CFO of Shell and the former CEO of Devon with strong oil experience. It's possible for what you can say to get a sense of how these changes are filter through the senior management day-to-day business. And ideally, if it is possible to get an answer from each of you free.
Carol Howle: Checking our homework. So I mean, the first thing I'd say is Albert is our Non-Executive Chairman. So he's responsible for oversight of our delivery and our strategic direction. And we, as the leadership team and CEO when Meg comes in, are responsible for the day-to-day running of the company. So we do have many interactions, as you can manage with the Board on that basis in terms of sharing with them progress against strategic milestones and in particular, the delivery that we've been talking about here. We talk about also where we are on portfolio and where we believe that we need to get to and why. And we also share with them competitor insights. We share with them benchmarking, how we're looking to continuously improve what we're doing. So having that composition of the Board means that we have people who've been in the industry. We have people who are outside of the industry who challenge us in different ways as well from a technology perspective. And I think that just helps us generate more ideation and thinking, and we challenge ourselves from that perspective. So the intent there is to make even better decisions with the use of that capability set. How do you feel about it, Kate?
Katherine Thomson: Sure that's 3 questions in one. But look, I've been on the Board now for 2 years. And my reflections are during that time, I think the conversations in the boardroom have got better and better. Albert coming in as Chairman. He's been incredibly supportive. He brings a different style and that freshness is great, and I think we welcome it. It's great to have a different set of eyes coming in to ask questions. And it's really important in any area of any business that you have a freshness coming in and an ability to look from the outside and ask the right questions. So I welcome that. I particularly welcome the number of ex-CFOs I have around me. That's a real treat. And then I think the addition of Dave Hager, as you know, deep upstream experience, particularly on the onshore. Again, we have retirements that will continue to roll through as a Board, and it's important that the Board is thinking ahead of those to make sure that the succession is smooth, and that's a lot of what you've also seen happening in the boardroom. But I think the Board are incredibly supportive of management. I think we have really good quality conversations and debates. It's not just a monologue and presentation. It's a conversation, which I think is incredibly helpful.
Gordon Birrell: Maurizio, just I'll give you a very brief answer. I found Dave Hager and Simon Henry a tremendous challenge. They're very experienced oil and gas people, of course, their ability to challenge William Lynn and myself in the matter of oil and gas investments, performance is actually tremendous. And I would call out Melody Meyers as well. Melody has been around a few years, and her challenge on safety, frankly, has made us a better company. And then, of course, Albert is value-driven, and we like that.
Craig Marshall: Yes, Josh, and then we'll come back to the phone.
Joshua Eliot Stone: Josh Stone again from UBS. I wanted to ask you about your integrated model because in the past, when anyone's challenged you on that, you've always said lots of value in trading. We won't sort of entertain splitting up parts of the business. But if we look at the last sort of year, it feels like there's been an awful lot of oil and gas sort of satellite ventures set up of sort of the consolidated parent. And you yourselves have done some of the things as I think about your offshore wind venture. It sounds like you're [indiscernible] lightsource BP, maybe also on Kirkuk. So when you think about the potential for maybe doing more transactions like this to unlock value from your -- particularly from your oil and gas business, actually, in particular, I'm thinking about BPX because you talked about some particularly attractive returns there. Is your view still that BPX is far better on the consolidated business? Or actually, could this be one where there's a lot of strategic value as an independent company?
Carol Howle: I mean I think I'll come and add something on the trading side, and then I'll pass it to Gordon. So I mean, I think first thing I would say is BPX is a core part of BP. It's got a great production forecast through to the end of the decade. I'll let Gordon talk to that. And it's also a great shore of onshore expertise that we share across the rest of BP. So that would be difficult to replicate. In terms of decisions around do we keep it for integrated value or not, the key thing there is what is the best value for BP. So if we do believe that actually it's better value, somebody else will value that position more and we can actually utilize the proceeds from that into a different opportunity that we value more even if there is trading value associated with it, we will make the right decision for BP on that basis. Now that doesn't mean, of course, from the trading perspective, we don't try and negotiate in terms of what those terms are or whether we can keep access in any way, shape or form for the better value, the additive value. But it's all about is this the right thing for BP to do strategically? Are we going to get fair market value proceeds in? Can we use those proceeds elsewhere more wisely for something that creates a better opportunity and does it deliver better value for shareholders? If the answer is yes, if my trading team are listening, then the answer is that's what we'll do. Gordon?
Gordon Birrell: Yes. And I would just add, Josh, it's a great question. But BPX, 7 billion barrels of oil and gas equivalent in place, 30, 3-0 Tcf of gas 15 yet to develop. It's a core part of BP. And there is the integration value, which I'll finish on, but it's such a core part of BP. And the performance in the last 2 years has just come on leaps and bounds and maybe 2 metrics that I haven't mentioned already. The NPV per acre that we have is the highest -- we're either 1, 2 or 3 in the 3 basins that we operate in the Permian, the Delaware side of the Permian, the Eagle Ford or the Haynesville. We're #1, 2 and 3 NPV per section. We're first quartile in reserves per foot drilled in -- across the 3 basins that we're drilling. And most recently, in the last 6 months, we've been knocking out the park in terms of reserves and production per well from East Texas in the Haynesville. So it's a core part of our company. performance has improved. It's a key part of our growth -- and the team in Denver work hand in glove with Carl's team to maximize the value that we get from the production. So we like having it in the portfolio and no intention to sell off at this point.
Craig Marshall: Thanks, Gordon. We'll go to the phone follow-up question with Paul Cheng. Paul?
Paul Cheng: Paul Cheng, Scotiabank. Carl, I mean, there's a little bit of the other side of the question of what Josh just asked. On one hand, I think you guys were saying that you want to create a simpler and streamlined operation of BP. And on the other hand, that from time to time that you have formed joint venture like whether it's in Angola, in Norway and now that after the sales of Castrol, -- and I think we all have seen from history, joint venture maybe is great in day 1, but over time, become very difficult to manage and complicated the operation and your decision-making. And so how do you balance the 2 objectives?
Carol Howle: So I think, Paul, let me start, and then I'll pass it to the team. So we balance it in terms of what do we think is going to create the best value for BP, what's the best opportunity in the market and then how can we execute it in the most efficient way. And we've got a number of these JVs that we participated in, and we've learned a lot as well from the JVs that we participated in over the years. Some of that has been how to improve or where we need to reduce complexity or indeed where we've been able to bring learnings into BP and also improve ourselves from that. But the key is around it's a value conversation that we have, and we will always look to try and minimize complexity and improve safety and the operational reliability around them. But we do have a lot of experience in the area, both for JVs that we are no longer in, but also the ones that we're deeply embedded in today.
Katherine Thomson: And maybe if I add a couple of other thoughts, Paul. I think the philosophy of being simple is good, and I think complexity can slow you down and it can make you expensive and neither are particularly helpful when you're trying to create maximum value. But there are times where you can create unique opportunities to create value through a marriage of assets and partners. And I would -- I'd call out [indiscernible] and Azule actually because I think what you've had there is you've had a symbiosis occur where you've had the right partner with the right marriage of assets put together to create a differential value proposition. It doesn't occur everywhere. But where those circumstances exist, then I think it's appropriate to contemplate stepping into that complexity to create the incremental value. And we see something very similar with Castrol. As we looked across the entire range of different options we had on Castrol, the transaction that we signed just for Christmas was the transaction that would deliver the most value for us as a company. And I think that's important that we always have that philosophy as our very, very core as we contemplate different structures. But I don't think you can ever rule them out. It's about creating the most value, and that will come down to facts and circumstances.
Craig Marshall: Thanks, Kate. We'll come back to the room. A question at the back with Matt.
Matthew Lofting: Matt Lofting, JPM. Just a follow-up on the cost reduction program. The progress through the $2.8 billion in the last 2 years has been really good and swift. It looks like the, I guess, the target ex Castrol implies that the run rate slows over the next 2 years. I just wondered what's holding you back from being more ambitious in raising that target at this point?
Katherine Thomson: Should I take that one?
Carol Howle: Yes. Why don't you.
Katherine Thomson: Look, we have -- we've delivered really well so far against the 4 to 5, $2.8 billion, so well over halfway there. Honestly, on cost, I don't think you're ever done. I mean, ultimately, why are you focused on your cost base? It's to make you the most efficient company and the most competitive company you can be amongst your peer group, that has to be why you're doing this in order to drive incremental cash flow. And we talked about AI earlier. I think a lot of the areas of the company, we are looking hard at AI, both in terms of cost reductions, but also increased productivity. And I think we're just at the early stages of truly understanding what it's going to unlock. I think there are so many opportunities there that we don't yet contemplate. With regard to upgrading targets, I think there's far more value to be gained by actually demonstrating what we're delivering rather than continually upgrading targets. So measure us on what we do as opposed to the targets that we put out. And I think you can hear we are really, really focused on this area of efficiency and competitiveness, and we will keep going. We will continue to strive. Our competitors are not standing still and neither are we.
Craig Marshall: Thank you. Take one more question from Doug. And then Chris will come to you.
Douglas George Blyth Leggate: Kate, I'm going to come back to you, if I may. Listening to the questions in the room, there still seems -- maybe it's a U.S. versus European thing, I'm not sure, but there still seems to be a perception that cash returns and value return are the same thing, and they're obviously not. You have $158 billion enterprise value if we take the capital structure as it sits as it was at the end of '25. You've talked about taking that down to $143 that's 2027. Where do you see the optimal capital structure? However you want to express it as the $7 billion versus the $5 billion of debt holders versus shareholders or maybe even in breakeven terms, where do you see the optimal capital structure by 2030?
Katherine Thomson: I think that's a work in progress. This is the bit that I feel we need to spend quite a lot of time reflecting on in consideration of how we want to step into these growth options we have ahead of us. I think it's the right question to ask, come back and ask me again in 6 months when I've had time to go through all of this with Meg, prejudging where we should get together as a leadership team once Meg is in role, I think, would be inappropriate. I think there's a moment in time as we, as a new leadership team come together and take a really good look at where we're taking our company in the next 5 years. and debate that with the Board. And then when we're ready, we'll be able to update that. It's absolutely the right question to ask. I just don't have a great answer for you right now because we're still working through that.
Craig Marshall: Thanks, Doug. We're going to take 2 last questions, one from Chris and then one at the back.
Christopher Kuplent: It's Chris Kuplent again from Bank of America. I might be quick. Kate, I realize you've added the $1.5 billion Castrol leaving your OpEx into your targets. What about your free cash flow target for 2027? It looks like Castrol did amazingly well this year, running at about a $700 million number or so in terms of free cash flow. Where are you in terms of how much free cash flow you've sold so far, 5 billion achieved in '25 plus 6 billion announced -- and do you, therefore, feel those are still free cash flow-wise rounding errors before you have to update us on your 2027 free cash flow target?
Katherine Thomson: Yes. Let me give you a quick answer and maybe we can come back to that with the IR team offline, Chris. As I look at the free cash flow targets, of course, they were excluding any divestment on Castrol. Of course, what we've got is we are taking operating cash flow out from the divestment. But of course, we're also reducing CapEx. But on the other side, I'm reducing my finance costs. So as I look at the totality of that, it's probably in the order of a couple of hundred million, but we have a range around our free cash flow generation. I'm still very confident of us delivering the targets. I see no need to change that right now when I contemplate the impact of the transaction. But we can take you through the bridge, if that's helpful.
Craig Marshall: Great. Thanks, Chris. And final question at the back there.
Henry Tarr: It's Henry Tarr at Berenberg. As I look at the developments ahead of you, as you get to 2027, it looks like there's potentially a lot that could come on with Bumerangue and the Paleogene and elsewhere. Is that going to be possible within the current CapEx frame? And then as you sort of look at those developments and you're going through the process now as to how you're going to sort of ramp them up, how are you going to try and keep costs sort of under control and manage these developments? Are you going to approach them in a certain way to try and minimize the potential for any cost overruns, et cetera?
Katherine Thomson: Shall I take the capital frame first, Gordon? -- and then let you talk about developments and costs. Look, Gordon and William challenge me hard regularly on competing for capital inside the frame. As you know, we've got a lot of choice there. We're very comfortable with regard to our 13% to 15% frame for the next 2 years as we step through the initial phases of these understanding and then progression of these opportunities. No need to change that. We'll update beyond that when we're ready. But Gordon, in terms of cost control?
Gordon Birrell: Yes. And just to add on CapEx, the Paleogene is fully funded within our capital frame that we have. Both projects are FID-ed, Kaskida, Tiber-Guadalupe, so fully funded. The big spend on Bumerangue really doesn't kick in until closer to FID, depending on whether we do an early production scheme or not, and we just need to make choices around that. In terms of cost, I think this is where technology and AI comes in. The platform or the FPSO of tomorrow won't look like the one of the past. And our most recent platform that we brought online, absent GTA in Azerbaijan, [indiscernible] Central East fully controlled from onshore, so much less staff offshore, easier shifts on people, less people exposed to hazard. So I think that's the future, and that will keep costs down. So it's application of technology, continuing to work the supply chain. That's always going to be a feature of upstream where a huge amount of our spend and OpEx is in the supply chain. So I see lots of opportunity actually to keep costs under control as we grow the company.
Craig Marshall: Super. Thanks, Gordon. I think what we'll do is we'll close the Q&A on that note. A big thanks as ever to everybody for their questions in the room and for those online. We do look forward to meeting with many of you in the coming weeks and coming months. And on behalf of Carol, Kate and Gordon, thanks again.