Fourth quarter and full year 2021 results

Highlights

Underlying results and cash flow

•   Underlying replacement cost profit* for the quarter was $4.1 billion, compared with $3.3 billion for the previous quarter. This result was driven by higher oil and gas realizations, higher upstream* production volumes and stronger refining commercial optimization, partly offset by a significantly lower oil trading result and an average contribution from gas marketing and trading and the impact of higher energy costs.
  
• Reported profit for the quarter was $2.3 billion, compared with a loss of $2.5 billion for the third quarter 2021. The reported result includes adjusting items* before tax of $3.0 billion with net impairments of $1.1 billion and adverse fair value accounting effects* of $0.9 billion primarily due to further increases in forward gas prices compared to the third quarter. 
• Operating cash flow* of $6.1 billion includes a working capital* build of $2.2 billion (after adjusting for inventory holding gains* and fair value accounting effects).
• bp received $7.6 billion of divestment and other proceeds in the full year including $2.3 billion during the fourth quarter. bp expects to receive proceeds of $2-3 billion in 2022.
• For full year 2021 ROACE* was 13.3%.

Building a track-record of delivery against our disciplined financial frame

• For the fourth quarter bp has announced a dividend of 5.46 cents per ordinary share payable in March 2022. 
• Net debt* fell to $30.6 billion at the end of the fourth quarter – a reduction of $8.3 billion compared to fourth quarter 2020. 
• Capital expenditure* in the fourth quarter and full year was $3.6 billion and $12.8 billion respectively. bp now expects capital expenditure of $14-15 billion in 2022 and continues to expect a range of $14-16 billion per annum through 2025. 
• During 2021 bp generated surplus cash flow* of $6.3 billion.
• Share buybacks of $1.725 billion were executed during the fourth quarter including $1.25 billion announced with third quarter results and $475 million to complete the buybacks announced with second quarter results.
• bp intends to execute a further $1.5 billion share buyback from 2021 surplus cash flow prior to announcing its first quarter 2022 results. 
• For 2022, and subject to maintaining a strong investment grade credit rating, bp is committed to using 60% of surplus cash flow for share buybacks and intends to allocate the remaining 40% to strengthen the balance sheet. 
• On average, based on bp’s current forecasts, at around $60 per barrel Brent and subject to the board’s discretion each quarter, bp expects to be able to deliver share buybacks of around $4.0 billion per annum and have capacity for an annual increase in the dividend per ordinary share of around 4% through 2025.
• In addition, to date in 2022, bp has executed a share buyback of $500 million to offset the expected full year dilution from the vesting of awards under employee share schemes in 2022. 
• The board will take into account factors including the cumulative level of and outlook for surplus cash flow*, the cash balance point* and the maintenance of a strong investment grade credit rating in setting the dividend per ordinary share and the buyback each quarter.

Investing for the future - transforming to an Integrated Energy Company

• In a separate announcement, bp has today provided an update on the significant progress made in executing its transformation to an IEC since outlining its new strategy. Since announcing third quarter results:
  • In resilient and focused hydrocarbons bp announced the start-up of Platina, offshore Angola – the seventh major project* start-up during the year. In addition, bp has taken further steps to drive portfolio competitiveness supporting the proposed acquisition of Lundin Energy's oil and gas business by Aker BP.
  • In convenience and mobility, bp acquired EV fleet charging provider AMPLY Power in the US, and in the UK, bp and Marks & Spencer agreed to extend their convenience partnership until at least 2030.
  • In low carbon bp has continued to advance its offshore wind strategy with the award of a lease option with 2.9GW gross potential in the Scotwind auction and finalizing offtake terms for the Empire Wind 2 and Beacon Wind 1 projects offshore New York. In addition, bp has announced plans for a new large-scale green hydrogen production facility in the UK - HyGreen Teeside - and formed a strategic partnership with Oman to progress an integrated project to deliver world-class scale renewable energy and green hydrogen.

(a) Prior to 2021 adjusting items were reported under two different headings – non-operating items and fair value accounting effects*. See page 29 for more information.

(b) Divestment proceeds are disposal proceeds as per the condensed group cash flow statement. See page 3 for more information on other proceeds.

(c) See Note 9 for more information.

RC profit (loss), underlying RC profit (loss), net debt, ROACE and adjusted EBIDA are non-GAAP measures. Inventory holding (gains) losses and adjusting items are non-GAAP adjustments.

* For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 35

Further information

Contacts

bp press office, London: +44 (0)20 7496 4076, bppress@bp.com

Cautionary statement

In order to utilize the ‘safe harbor’ provisions of the United States Private Securities Litigation Reform Act of 1995 (the ‘PSLRA’) and the general doctrine of cautionary statements, bp is providing the following cautionary statement: The discussion in this results announcement contains certain forecasts, projections and forward-looking statements - that is, statements related to future, not past events and circumstances - with respect to the financial condition, results of operations and businesses of bp and certain of the plans and objectives of bp with respect to these items. These statements may generally, but not always, be identified by the use of words such as ‘will’, ‘expects’, ‘is expected to’, ‘aims’, ‘should’, ‘may’, ‘objective’, ‘is likely to’, ‘intends’, ‘believes’, ‘anticipates’, ‘plans’, ‘we see’ or similar expressions.

In particular, the following, among other statements, are all forward looking in nature: expectations regarding the COVID-19 pandemic, including its risks, impacts, consequences, duration, continued restrictions, challenges, bp’s response, the impact on bp’s financial performance (including cash flows and net debt), operations and credit losses, and the impact on the trading environment, oil and gas prices, and global GDP; expectations regarding the pace of transition to a lower-carbon economy; plans, expectations and assumptions regarding oil and gas demand, supply or prices, the timing of production of reserves, storage levels and decision making by OPEC+; expectations and assumptions underlying liquidity forecasts and reverse stress tests; expectations regarding refining margins, refinery utilization rates and product demand; expectations regarding bp’s future financial performance and cash flows; expectations regarding future hydrocarbon production and project ramp-up; expectations regarding supply shortages; expectations with respect to completion of transactions and the timing and amount of proceeds of agreed disposals; expectations with regards to bp’s transformation to an IEC; plans and expectations regarding bp’s financial framework; expectations regarding price assumptions used in accounting estimates; bp’s plans and expectations regarding the amount and timing of share buybacks and quarterly dividends; expectations regarding the amount of full-year dilution from the vesting of awards under employee share schemes in 2022; expectations regarding bp’s credit rating, including in respect of maintaining a strong investment grade credit rating; plans and expectations regarding the allocation of surplus cash flow to share buybacks and strengthening the balance sheet; plans and expectations with respect to the total depreciation, depletion and amortization, expected tax rate and business and corporate underlying annual charge for 2022; plans and expectations regarding net debt, debt and bp’s intentions to strengthen the balance sheet; plans and expectations regarding the divestment programme, including the amount and timing of proceeds, and plans and expectations in respect of reaching $25 billion of divestment and other proceeds by 2025, and expectations that divestment and other proceeds for 2022 will be $2-3 billion; plans and expectations regarding bp’s renewable energy and alternative energy businesses; expectations regarding reported and underlying production and related major project ramp-up, capital investments, divestment and maintenance activity; expectations regarding the underlying effective tax rate for 2022; expectations regarding the timing and amount of future payments relating to the Gulf of Mexico oil spill; plans and expectations regarding capital expenditure, including that capital expenditure, including inorganic capital expenditure, will be within a range of $14-15 billion in 2022 and within a range of $14-16 billion per annum through 2025; expectations regarding Rosneft’s operational and financial results, and expectations with respect to Rosneft dividends; and plans and expectations regarding new joint ventures and other agreements, including partnerships and other collaborations with State Power Investment Co. Ltd., Qianhai Foran Energy Co. Ltd, EnBW, Grabango, Aberdeen City Council, and bp’s Jio-bp and Yermak Neftegaz LLC JVs, as well as plans and expectations regarding offtake terms for offshore wind projects in New York, the HyGreen Teesside green hydrogen production facility, the start-up of Mad Dog Phase 2 and the Tangguh expansion project, the development of LSbp’s pipeline of projects, the completion of the acquisition of the oil and gas business of Lundin Energy, the completion of bp’s taking full ownership of BP Midstream Partners LP, the development of EV charge points, the plan to create an integrated energy hub at bp’s Castellón refinery in Spain and the completion of the establishment of bp’s Basra Energy Company joint venture with PetroChina.

By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future and are outside the control of bp.

Actual results may differ materially from those expressed in such statements, depending on a variety of factors, including: the extent and duration of the impact of current market conditions including the volatility of oil prices, the impact of COVID-19, overall global economic and business conditions impacting our business and demand for our products as well as the specific factors identified in the discussions accompanying such forward-looking statements; changes in consumer preferences and societal expectations; the pace of development and adoption of alternative energy solutions; developments in policy, law, regulation, technology and markets, including societal and investor sentiment related to the issue of climate change; the receipt of relevant third party and/or regulatory approvals; the timing and level of maintenance and/or turnaround activity; the timing and volume of refinery additions and outages; the timing of bringing new fields onstream; the timing, quantum and nature of certain acquisitions and divestments; future levels of industry product supply, demand and pricing, including supply growth in North America and continued base oil and additive supply shortages; OPEC+ quota restrictions; PSA and TSC effects; operational and safety problems; potential lapses in product quality; economic and financial market conditions generally or in various countries and regions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought or imposed; the actions of prosecutors, regulatory authorities and courts; delays in the processes for resolving claims; amounts ultimately payable and timing of payments relating to the Gulf of Mexico oil spill; exchange rate fluctuations; development and use of new technology; recruitment and retention of a skilled workforce; the success or otherwise of partnering; the actions of competitors, trading partners, contractors, subcontractors, creditors, rating agencies and others; our access to future credit resources; business disruption and crisis management; the impact on our reputation of ethical misconduct and non-compliance with regulatory obligations; trading losses; major uninsured losses; decisions by Rosneft’s management and board of directors; the actions of contractors; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks or sabotage; and other factors discussed elsewhere in this report, as well those factors discussed under “Risk factors” in bp’s Annual Report and Form 20-F 2020 and those factors discussed under “Principal risks and uncertainties” in bp’s Report on Form 6-K regarding results for the six-month period ended 30 June 2021, as filed with the US Securities and Exchange Commission.