The Rising Influence of Rising Affluence

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PLTR/BP - Some CC comments discussing the impact on upstream costs and expansion of project to downstream.

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Lydia Rainforth (Barclays): Hi, Craig, and thank you. And good morning. Two questions if I
could. If I can come back to the buyback, and Murray, you referenced the kind of the
working cap impact on last quarter, this quarter, but there is a lot of volatility, it seems like,
in those numbers. So, do you ever think about moving to something that's slightly more
stable in terms of that framework? And I am particularly thinking about Q2 where you do
have Gulf of Mexico payments going out, you do have TravelCenters closing. So just so
that idea is that the volatility sometimes isn't necessarily helpful for from that side.
And then the second one was actually just on the OPEX side and the upstream, clearly
that numbers were down 12% on last year in what has been an inflationary environment.
I was just wondering if you can comment a little bit more about what's driving that. Thank
you.
Murray Auchincloss: Great. Lydia, the financial framework is crystal clear from our
perspective, the five priorities we've been doing it for the past three years. No intent to
change. And I don't imagine you want me to repeat the guidance I just gave the guys on
the previous two questions, but no intent to change, which I think was what you might
have been asking. And just as a reminder, the board looks through the year as we think
about surplus, and we're committed to 60% of surplus cash flow for share buybacks. And
yes, working capital does swing amazingly across the quarters and has many, many
moving parts. And as you can see, we leaned in a bit this quarter given what happened on
working capital.
As far as your second question, opex in the upstream, you have to think about this really
as a 10-year journey that the upstream's been on. You'll remember that we heavily started
to digitise years ago. And the work of all of that, along with reorganisation that occurred to
move to a much more central model with agile squads is really starting to pay off. I think
the number was $14/barrel lifting costs back in 2012 or 2013, and we're all the way to sub
$6 per barrel now and aspiring to hold that moving forward. That's really about the fact
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that we spent years and years and years streamlining all our data, thanks to help from
Palantir, a great partner we have. They really helped us clean up our data so that everybody
would have it at their fingertips.
That enabled us to centralise many of the teams around the globe from the drillers to the
reservoir engineers to the explorers. And another big thing we did in the background is we
put in place a single SAP system across the upstream, including a purchasing package.
And that purchasing package now really coming to bear where we're able to do offshore
work remotely. So, in October, we're going to host an away day for the upstream and
Archaea, and at that we'll do a few showcases on the brilliant stories that we're seeing
out of this.
The one that captured my imagination last quarter was that the operators on Schiehallion
can actually plan and do the entire work onshore, so they don't have to travel back and
forth on helicopters offshore to plan a trip. They have the laser sighting that can put up all
the architecture of scaffolding, et cetera, onshore in a virtual model. They bring the
contractors in to work through the work packs, and all of a sudden you eliminate all the
labour going back and forth between our planners, the contractors, et cetera, and you arrive
with a package that works the first time.
That's just a step change, and nothing I've ever seen in my career, especially in difficult
places like the North Sea. So, it's a long, very long-winded answer. Sorry for that, Lydia.
You can tell I have a huge amount of passion in this, but digitisation, agile and the structure
that Gordon put in place have really, really brought technology to bear inside the upstream.
And the great thing is that we can start on the downstream now, so we can really start on
the refineries in the customers business, which we haven't done yet. So, it'll be fantastic
for the future. Hope that helps, Lydia.
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https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/bp-first-quarter-2023-results-qa-transcript.pdf