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00:0018 months ago you laid out your vision for BP a year ago you gave more specific targets. If you want a scale of one to 10 10 being you're at your goal. Where do you feel like BP is right now. I feel really good. IBEX about where we're at and it's great to see you. And thanks for including me. I feel really good. I think it's been a difficult year for the world for society for our employees for shareholders. And the pandemic has obviously been overriding everything. But we've done a lot in the last 18 months. And I was just looking back at a few of the things this morning. But our strategy at its core speaks to performing well transforming. It's about delivering for our shareholders today while preparing BP for tomorrow. And I think on that front we've done pretty well. I think our first quarter results were I think everybody would say a strong set of results and show that the business is really performing bringing on new projects taking cost out of the system doing the things that a well-run business does. And at the same time I think over the past 18 months we've made some real steps into the future as we prepare and indeed transition BP for tomorrow. So feeling pretty good as we sit here today Alex. So given one to 10 10 being you did everything it's perfect where you. Where do you feel like you're at. Well it's a big company of course in many many parts of the world. So there are always issues. But I'm certainly up there at an 8 or 9 0 8 or 9. OK now talk about the two that performing while transforming and in terms of where you think the shareholders are. Because I'm sure the conversation with your shareholders has evolved very much the last 18 months here in the US a lot of oil companies like Exxon are getting a lot of activist investor shareholder pressure. So when you deal with shareholders where where are they from 1 to 10. Well I think look we have to put ourselves in our shareholder shoes. And what we announced last year particularly with our strategy update in August and September was a real strategic pivot for the company. And I think the real question on shareholders minds was whether this needed to be a choice. Was this a company that could transition for the future but maybe have to compromise on delivery for today. And I think that's what investors were trying to get their head around as we approach the end of last year. And that's why I think as we headed into this year the story has taken some time to sink in. I think people now understand it a lot better. You may have seen Barclays recent report that raised us to their top pick in the sector and said that we were the most undervalued or we had the most upside. And I think it was those first quarter results that showed that this was a business that had the potential to generate real cash. And we delivered that net debt of 33 billion less than thirty five over a year early. The cost is coming out of the system. Two and a half billion by the middle of this year three to four billion per annum by 2023. We're bringing on new projects. They're going well. So all of the things that a well-run business needs to do and I think investors like that and they like the fact that through our ambition that we launched with you in fact last year we're sort of we're ahead of the game and net zero ambition a 50 percent reduction in carbon intensity and importantly a 40 percent reduction in production. So are we preparing BP for tomorrow. I think few people will question our resolve to do that. And at the same time importantly we have to deliver on the investor promised today which is to deliver cash returns to our investors. And that's what we're doing. So if BP is at eight or nine shareholders or to 89 I think our shareholders are much more comfortable with the strategy and the story and much more supportive of it today than they would have been several months ago. I think that's on the back of strong operating performance. That is the core. And at the same time I think they're seeing us take decisions as we invest into the future that are disciplined that are strategically coherent and that set the company up well for the long run. This isn't a light switch. This is not a flip overnight. This is a transition. And I think that the investors are seeing Alex more and more that this doesn't have to be a choice that they can get a resilient dividend today. They can get upside through share buybacks. And if the oil prices stay strong these will be material share buybacks. This is a company that is going to grow 7 to 9 percent per share in terms over the next five years. And it can be part of a sustainable transition. So the proposition is becoming clearer and clearer to investors. And I think they are beginning to feel much more comfortable about the story and the strategy I'll put them in at. Feels like that's an eight warm for improving little clothing. We will go with it. OK. I mentioned Exxon and engine one at an activist investor and pressure but it's not just with Exxon. Shell also lost a court ruling that sort of pushing them to move faster to speed things up. If someone came to you and said Bernard you've got to move BP faster than you thought. Can you do that. Well let me just say a couple of things on that. Alex and you know I think I can say this openly. I think few people doubt that we are doing everything that we can to transition this company. Last year we took the very difficult decision to cut our dividend in half so that we can transition. We wrote off 20 billion dollars worth of assets which we felt neither should be produced or could be produced. They were written off a very difficult decision so that we can transition. We restructured the company in the biggest restructuring in 110 years so that we can transition and we announce a plan to cut our oil and gas production by 40 percent over the next decade so that we can transition. So I think it would be very difficult I think to ask more of a company of our size and scale. So I think the commitment is there. I think the evidence is there. And Alex as I look back when I spoke with you in London almost 18 months ago just before the pandemic look at what we have done in the new world since then. We had zero gigawatts of offshore wind. Then today we have three point seven. We had a renewable pipeline that was four gigawatts. Today it's twenty three gigawatts. We had 7000 charging points. Today we have 10000 charging points. Our net debt by the way at the end of that first quarter was fifty one billion. Today it's thirty three billion. So when I look at it on those dimensions of course there are people who will say that you should do more. But I think there are a lot of people who would say that's an ambitious plan. That's ambitious delivery. Keep going. Stay disciplined stay focused on performance and keep preparing this company for tomorrow. So that's what I would say in response to that question along the same lines. I'm wondering because you've had 18 months and no doubt you took over in this transition as CEO and an extraordinarily tough time. Is there some one thing that you felt that you could have done better that there was some kind of transient transition or some sort of thing that you did that you like. I wish I could have done that instead. I wish I could've done that better. And then conversely one thing that you're super super proud of but you felt with ambitious and that you got it and you nailed it. I think look I think the things that I would speak to Alex are around quite frankly and quite openly are people. You know we have seventy thousand people working in over 70 countries around the world. I come from an upstream background so intimately familiar with the people who went off shore to our facilities and kept the oil flowing. The people obviously that worked in our refineries that kept the fuel and the gasoline flowing. And when I moved to my new job meeting the people in our retail sites across the world who are right at the front line right at the front line sharp edge dealing with customers each and every day. And then I think well so what am I most proud of. You know I'm actually most proud of what they have done to keep the energy flowing in the world. It's extraordinary that even in a year when the entire world seemed to grind to a halt energy use was only only down by about 4 percent. So that's the thing that I'm most proud of those people. And the thing that I wish I could have done more of would have been to help those folks because some of the stories are incredible. We've just heard one gentleman come back from Angola to his family in the U.K. He's been away five and a half months now from his family because of all the quarantines and the road tests that we're doing. And he's going into quarantine hotel for two weeks in the U.K. We have our people on our ships around the world who've had extraordinary problems trying to create change and some of them being away for six or nine months. And you just wish that we'd everything that everyone has going on that you could help them more. But from a strategic perspective there are always things that you would do different. But I would have to say that on balance I feel good about where we're at in a strategic sense. It's now about a relentless focus on performance and execution and cash delivery and delivering on that shareholder proposition while at the same time not or while at the same time preparing the company for the future. There's a very good answer. When you talk about buying assets for wind and you mentions rhythm huge steps that you guys have made in the last 18 months. One pushback is that you guys are overpaying for assets. What's your response to that. My response is simple we're not overpaying for assets. It's as simple as that. We have a very clear return threshold. We've been very clear that we will not reach our targets if we cannot meet that return threshold of 8 to 10 percent. We walk away from far more projects than we do. And when we do them we do them in a disciplined way. People talk about the projects here in the Irish Sea. Alex there are probably six or seven companies that want to buy into that project today and they would pay a premium to enter that project. People say well you're an oil and gas company that's behind or late to the party or whatever language they wish to use and therefore you overpaid. And of course the answer to that is well in that particular instance we're not BP and our own. We have a partner called in BW who's a German utility with extensive experience in offshore wind. So it's not like we're doing these things on our own. So we're confident in what we are doing. We have a very clear financial framework. We have very clear financial objectives. And we are very clear that if we cannot meet those objectives we won't do the projects. And as I said we walk away from far more than we do. I would add by the way IBEX that in solar light source BP has done 31 projects now all of which have met our return thresholds. So this isn't something about the future. This is about a track record that exists today as well. So this is sort of the opposite of that question. Unbought Boston Consulting Group a few weeks ago had a report out that said the major here is the oil majors are going to spend more on low carbon investments this year than traditional oil and gas. The first time that flip would have happened for BP is they're going to be a point where that flip happens for you. We're going to spend more money on those low carbon investments than you do with oil and gas. It's 5 billion. It's 5 billion by 2030. When does it shift. By the end of the deck. By the end of this decade. Alex I think you'll see that start to shift. We're going to increase our investment in the transition by about 10 fold over the next five years or by the next 10 years eightfold over the next five years. So this is a material step up in an investment. We have to continue to invest in that hydrocarbon base because it is core to our strategy. And without those hydrocarbons we don't get to transition. So the hydrocarbons provide the cash flow that is necessary to make sure that our investors get the return that they deserve. They've been patient and it is time for them to get the return that they deserve. Make sure that we have a strong balance sheet and that we can invest into the transition. So this will evolve over time. It's not an overnight switch that some people would wish it were. This is a complex transition but it's one that I think our plan is hopefully very very clear on and that will play out over the coming years. Do you think that oil majors like yourself that are making these tough calls on where to invest money. Are you guys setting oil market up for a super cycle or do you think you can stay flexible enough to prevent that from happening while also spending a lot of capital and time into other types of investments. Well look I think a lot of people are talking about our commitment to reduce our production by 40 percent by 2030. That's about 20 percent by 2025. Even by reducing our volume by 20 percent by 2025 we will still grow our earnings and our cash flow from that business through that period. Why. Because we don't necessarily. Well we don't want to run the biggest oil business. We want to run the best oil and gas business. And as you well know that means that you focus relentlessly on your portfolio focusing on value not volume. We focus religiously on on margin. Our margins will go up 20 percent on a unit basis over the next five years. So this is a strategy of focusing on value creation. And that means we don't worry about volume. We focus on value. So I think there's a good chance that oil prices will be robust and high over the coming years. Alex I think there's a good possibility that they would be volatile. We're not planning on them being high. We're we're building a company that's resilient to a low price. But I can tell you and I can assure you that if they are high we have a portfolio that will absolutely benefit from that. And because we have the share buyback program that we have that says that 60 percent of excess free cash is used for buyback purposes that could result in material share buybacks over the coming years if prices remain at the levels that they are today. If you needed to though could you pick up the pace and produce more oil and gas if the world needed that to prevent. Supercycle or or as a discipline just gonna be the discipline the discipline is going to be the discipline in your words. We would do this 40 percent with or without an energy transition. This we believe is the right way to run a hydrocarbon portfolio. Focus on value. Focus on margin. Take cost out of the business. Digitize everything that we can. I've just come out of a meeting on digital. I've just come out of a meeting on Agile. We have what we think is the largest organization working in an agile way in the energy sector. Seven thousand people now working in a structured agile way. Decisions being made 30 to 40 percent quicker. That's what running a good oil and gas business is about for us. And that means that we can actually grow cash flow from that business over the coming years even as we shrink from. Plants are about carbon offsets. I know they're an important part of the energy transition because they're just some industries that just can't green quickly. What's the role. But then the prison for carbon offsets as you're just being a planet. A lot of trees. And that's really not going to do it. You talked talking about how BP thinks about that. Well the first thing is that we're going to reduce our emissions. Scope 1 and 2 emissions by between 30 and 40 percent within the next decade. We're also going to reduce the emissions from the carbon content of the oil and gas production that we produced. You'll remember this fact by also about 30 to 40 percent over the next decade. Importantly we do not rely on carbon offsets to achieve that level of emissions reduction. Now with that said we do believe that carbon offsets are an important tool in the toolkit to help the world get to net zero. This is a complicated challenging problem. And Alex we're gonna need all the tools that we can throw at it. Solar wind hydrogen CBS and indeed carbon offsets are what people call natural climate solutions. BP is one of it's very active in the trading space around this. When it's done properly it can be an important market signal to industries and allows them to actually bear the cost of that externality but do it in a way that is efficient. It also as you say has extraneous benefits around biodiversity. If it's done properly. So I think the key for me is twofold in natural climate solutions. Number one we do not rely on them for our own emissions plans over the next decade. Number two we will be active in that space in a trading sense. We need a proper effective market and we must make sure that quality is at the core of that because that is the most important thing. And when I talk about quality I talk about really being invested in reforestation or preventing something that was going to be cut down from being cut down. And also how it relates to the community where that works and how we make sure that those farmers are fairly compensated. We just started or we just bought a company in California actually and its role in life. It's called a finite carbon. It's role in life is that any farmer anywhere in the world can plant a single tree and get paid for it. And it does this through a satellite system where it has the resolution to be able to pinpoint a tree pinpoint the quality of the work and make sure that that farmer gets appropriately compensated. So that's the type of thing that can help but it's got to have quality at its core. Yeah. And that's makes of the broader sustainability point which leads me to when you sell an asset was the thought process because some might say it's better for you guys to keep an asset that then you can green better. But if you're just selling it maybe the person who buys it isn't gonna do it as well and is going to get a little bit dirtier and not greener. How do you make that more sustainable. Well look Alex I think the you know the first thing that I would say is that we don't own the resources in the majority of the countries that we work in. So some people say well just put the resource to one side put it in a bad bank or whatever and let it decline. Well that's their not ours to do that with. We do not own the resource. They are the resources of countries. And only countries can decide how best to develop their resources in their own economic interests. So that's one point I would make. Second point I would make is that divestment isn't the only route to our 40 percent reduction in production. We are exploring less. In fact we said we will no longer enter new basins to explore for hydrocarbons. We've taken our capital budget way down. It used to be almost 20 billion dollars a year in hydrocarbon states between 7 and 9 billion dollars in hydrocarbons. So we're not just selling. We're also doing it very very differently. Divestments have been part of our strategy for as long as I've been in the company. So there's nothing new here. Of course we take that money from divestments and we invested into the transition. So I would argue that's a net positive for the world. But finally Alex I would say the following. I have a responsibility clearly to society and to the world to do what I can do to help in a small way helped the world get to net zero. And that's what we are trying to do. I also have a responsibility to the share holders of BP to the owners of BP to to to to to grow the value of BP. And one of the ways to do that is to deal risk it as an investment proposition. And one of the ways to deal risk it is to decarbonise it. So I hold those two obligations side by side. And divestments helps me particularly on that obligation to the owners of BP if that makes sense. Does the tricky part in all of that is Rosneft. What kind of conversation you guys having about eventually having to sell it. Rosneft is so the first thing I would say is resilient. Hydrocarbons are absolutely core to the BP strategy. It's one of our three pillars growing convenience and mobility investing in low carbon electricity and energy and resilient hydrocarbons. In fact those resilient hydrocarbons are the engine of the transition that Rosneft is the epitome of resilient hydrocarbons both from a cost perspective and from an environmental perspective. Now why do I say that. Well first of all it's lifting. Costs are less than three dollars a barrel. And BP today they're between six and seven. So they're very resilient from a cost perspective and from an environmental perspective. Their greenhouse gas intensity per barrel of oil produced is better than BP. In fact it's better than many of the international oil companies. And of course they have tremendous scale. And by the way I would argue they care deeply about this subject. They've just released a new twenty thirty five plan where they're going to make that greenhouse gas intensity even better by between 20 and 30 percent. They've driven their fugitive emissions down by 70 or 80 percent in 2019. They've set a methane intensity target of point to five which is very strong an industry. So Rosneft cares deeply about its environmental performance. And so do the Russian people. The Russian people care as much about their environment and their lakes and their forests. From my own experience of having been there then we in the US and the UK care about our local environment. And when something is a priority in that company it gets done. And I've seen fantastic progress. We can learn as much from Rosneft in this subject as they can from us but clearly we work these issues together. Does that mean that you would never sell it. Rosneft is an absolute core part of our company and our strategy. OK that's pretty clear. As we just finish up I wanted to get your take on Scope 3 the emissions from your products. That is a big debate in the industry. If people commit to scope three analysts say yeah that's not gonna happen. No one can actually do that but it is definitely the elephant in the room. How do you think about starting to tackle that down the road. Well we have a carbon intensity target on scope three emissions. We said that we'll reduce the carbon intensity of those emissions by 50 percent by 2050. So that's number one. Number two I think it's very important that we have said that the carbon content associated with the oil and gas that we literally add to the world through our drilling and production around the world we're going to take that down by 30 to 40 percent over the next decade which I think is absolutely material. But look scope 3 emissions are absolutely important. We have to work with government because it's government who creates policy. We have to work with our customers to help them. And we have to. Alex instead of saying it's all on our customers or it's all on government which it is partly we have to be the ones who are saying look this is a really challenging problem. Back to that statistic. Imagine that in a world where it felt like the world ground to a halt energy use only fell by 4 percent. So this is a very complex problem to solve. But our role in BP isn't to tell society how hard this is. Our role is to help society give them what they want. And that's what an integrated energy company can do. That's our strategy. It's to help people get the energy that they want. That is clean reliable and affordable. That's what a hospital needs. That's what a data center needs. And our job is to try and help solve that problem with our customers and with government because without policy and without our customers we won't be able to do it without us on the production side. It has to be us working together. And that's what I. That is what I think is what leadership is about. Well Bernie you've done so much in 18 months. I look forward to the next 18 months for you guys. Thank you so much for your time. Very much. Appreciate it. Thank you for joining me.

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BP CEO Looney on Strategy, Green Energy

BP CEO Bernard Looney spoke to Bloomberg's Alix Steel on the company's strategy, the importance of hydrocarbons to the green energy transition, and why Rosneft is a core part of BP's strategy. (Source: Bloomberg)

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