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Hello, everyone, and thank you for your interest in BP's Second Quarter 2026 Results. Today's video presentation features Meg ONeill, Chief Executive Officer; and Kate Thomson, Chief Financial Officer.

The running order for today's prepared remarks is as follows: Meg will begin with her reflection since becoming CEO and the priorities she is setting for BP. Kate will then take you through our second quarter financial performance, and Meg will return to close with her perspective on the path ahead.

Let me first draw your attention to our cautionary statement. In this video, we will make forward-looking statements that refer to our estimates, plans and expectations. Actual results and outcomes could differ materially due to the 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, Meg.

Thanks, Craig. Just a few weeks ago marked my 100th day as CEO of BP. This has coincided with one of the most volatile periods within global energy markets. When the conflict in the Middle East disrupted global oil and gas supply, the BP team responded, keeping energy flowing across the world safely, reliably and efficiently.

I want to start with an update on safety. Over the past 4 months, I've seen a deep commitment to safety across BP. It comes first, always, but performance in the first half of the year has not been where it needs to be. Tragically, a Castrol colleague died following an incident at the Gemlik blending plant in Turkiye in April. Our thoughts remain with their family, friends and colleagues. An investigation is underway to understand what happened, and we will learn and apply those lessons to improve our business.

On process safety, we saw an increase of events in the first half of 2026 when compared with the same period in 2025, including an increase in Tier 1 events. Nothing is more important than the safety of our people. Operational excellence is foundational to what we do, and this begins with consistent safe performance. Our safety goal remains to eliminate fatalities, life-changing injuries and Tier 1 process safety events across our operations.

Turning to second quarter results. We demonstrated strong financial delivery and progress towards our 2027 targets. But there are also areas where performance has been below where it needs to be. On the headlines, upstream production was 2.2 million barrels of oil equivalent per day. This was 6% lower than the first quarter, driven by scheduled seasonal maintenance, predominantly in the Gulf of America, disruptions in the Middle East and some operational issues in the North Sea and Indonesia. This was partly offset by stronger performance at bpx.

Refining throughput was around 1.5 million barrels per day. This was 4% lower than the first quarter due primarily to higher planned turnaround activity and lower refining availability. We delivered $5.7 billion of underlying profit, $2.5 billion higher than the first quarter and $10.9 billion of operating cash flow after a $1 billion working capital build. Financial obligations, including net debt, hybrids and Gulf of America settlement liabilities reduced by around $7 billion compared to the first quarter. Today, we have announced a 4% increase in the dividend per share.

Before I hand over to Kate to go into our 2Q results in more detail, I would like to share my reflections of the business and our direction of travel. Alongside working with the leadership team to manage the business, I've spent significant time with BP's teams on the ground. I've also spoken with investors, business partners, governments and other key stakeholders. I came to BP because I believe this company can be extraordinary, and I've seen enough in 4 months to know that's true.

When you combine great assets with great people who are ready to step up, you get a company with real potential. I believe our integrated model is a source of competitive advantage. The combination of upstream and downstream supported by trading gives BP an earnings and cash flow profile that is more resilient through the cycle with greater flexibility to capture value across markets. But our performance over the past few years has not met our own expectations nor the expectations of our shareholders.

We have not delivered consistently enough across our operations. We have written off too much shareholder value, and we face a challenge of liabilities and costs that means our resilience to a low price environment is insufficient, exacerbated by a portfolio that is too stretched and too complex. To achieve consistently strong performance, we have to challenge ourselves. We must hold up a mirror and be honest about what we see, be proud of our strengths and do the work to identify and address our weaknesses. We must deliver at pace with urgency and with deep accountability for the decisions we make.

Going forward, every part of the company needs to earn its place, generating cash, improving returns and strengthening the whole. We need to improve the quality of our earnings and cash generation and unlock more value for shareholders. That is why I am setting 5 priorities to deliver a step change in performance and to grow shareholder value.

The first priority is strengthening the balance sheet. We are making progress, but we are not where we need to be. Too much cash is currently being used to service liabilities. I want more of the value proposition to move back to equity holders through growth, distributions or both. As a starting point, that means reducing financial obligations relative to our scale to at least in line with our European competitors. A stronger balance sheet gives us more resilience, more flexibility and greater capacity to create value through the cycle.

Second, we will simplify and focus the portfolio. As we high grade, we will do so based on value creation, not sentiment, not history and not legacy attachment. Some assets may have been important to BP in the past. That does not necessarily mean they are the right assets for BP's future. We are in action. We plan to market our U.S. renewable natural gas business, Archaea Energy, and we recently launched a process to market our North Sea business. I'll come back to talk more about portfolio shortly.

Third, we will invest with discipline and drive capital efficiency. Every dollar of capital has to compete, and we need to get fit to grow. We need to compete in the weight class we are in, focusing capital on our best opportunities to maximize cash flow and returns. Our decision to exit Bay du Nord shows that discipline in action.

Fourth, we need to run our assets safely, reliably and with greater cost efficiency. We have made progress on structural costs, but interventions to date have not delivered sufficient savings to the bottom line. That's what matters, and we have more to do. The opportunity is to use technology, simplification and organizational redesign to build a more competitive BP. Kate will talk more about costs shortly.

Finally, we must tackle culture to enable faster, more effective decision-making and greater accountability for results. I want challenge to be welcomed, disagreement surfaced early and decisions to be rigorous, evidence-based and accountable. Reorganizing into upstream and downstream is an important first step on this journey. Portfolio optimization is central to building a simpler, stronger and higher value BP.

The data on this slide gives an illustrative view of free cash flow and returns from our assets over the past 3 years. It does not capture the through-cycle value of every business or the additional value created through integration and trading for all assets. As with capital allocation, we consider a broader set of factors, including strategic alignment, optionality and sustainability. But it does show the value lens we are applying across BP.

We have assets and businesses that generate attractive returns, material free cash flow and strategic value for the group. But we also have variability with some assets consuming capital, adding complexity or diluting returns without generating enough cash flow. We are taking an objective view asset by asset, business by business, looking at cash generation, returns, capital efficiency and strategic fit.

Upstream is anchored by material positions, including in the U.S. and the Middle East, advantaged basins where we have scale, deep technical capability and strong relationships. I'm convinced that BP has the potential to be one of the best upstream businesses in the industry. Major projects sanctioned for start-up between 2028 and 2030 are progressing according to schedule, but sanctioning projects is not the proof point, delivery is. Executing these projects safely, on time and on budget is what investors expect from BP, and it is a core measure of how we will rebuild confidence.

Downstream is a strategically important business, bringing scale, diversification and resilience to the group earnings and cash flow. Regional integrated value chains link refining, logistics, trading and customer channels to capture value across the system. During recent volatility, that helps secure supply and keep products flowing to customers. The model varies by market, but the principle is the same. The system is strongest when it works together.

Cherry Point on the U.S. West Coast is a good example. Its coastal position gives access to global crude markets, feedstock flexibility, export capability and market optionality. Our customer channels, retail, aviation and B2B, provide stable offtake and a strong return on capital. But there are also areas to improve, including reducing total cash cost relative to gross margin and targeted performance programs in businesses like TravelCenters of America.

We will continue to assess and divest assets that do not provide integrated value or dilute our margin profile as we have with the announced sale of Austria mobility & convenience and Gelsenkirchen refinery. Now, the point of optimization is not simply to reduce the number of assets. It is to focus capital on activities that can generate stronger cash flow, better returns and greater value through the cycle and taking action where they do not.

Assets matter, but it's our portfolio, combined with a world-class trading organization that provides differentiated value for BP. Supply, trading and shipping connects the system, enabling us to source supply, manage disruption, access demand growth and direct molecules to the highest value markets. We have built deep capability across regions, products and markets over decades and now operate a trading business of significant scale. That scale and diversification matters.

We are not dependent on any one region, asset or market condition to create value. Our track record is strong. Over the last 6 years, trading has delivered an average uplift of around 4 percentage points to BP's return on capital employed, of which at least 2 percentage points has come from the base global portfolio, which has demonstrated resilience through the cycle. The breadth of the portfolio gives us the ability to capture upside when market conditions present greater opportunities.

We will continue to invest in technology across trading to maintain leadership, improve efficiency and grow, and our merchant strategy will continue to provide access to emerging markets. As we grow, we will maintain cost discipline, growing revenue while maintaining the cost base to improve margins. It is this combination of a high-quality upstream and downstream, supported by distinctive trading capability that makes a world-class global integrated oil and gas company, one that provides energy to our customers while creating value for our shareholders. We're clear on our plan and looking to accelerate delivery.

Now let me hand over to Kate to talk in more detail on our second quarter results. Thanks, Kate.

Thank you, Meg. So now let me turn to our second quarter financial performance in more detail, starting with profit. Group underlying profit increased by 78% from the first quarter, helped by a broadly strong price environment and higher trading performance. Starting with segment earnings. In Gas and Low Carbon Energy, segment underlying operating profit increased by around $800 million, reflecting higher realizations, including the impact of price lags with gas marketing and trading broadly flat compared with the first quarter.

In Oil Production and Operations, segment underlying operating profit increased by around $1.6 billion. This reflected higher liquids realizations, including the impact of price lags, production mix benefit and higher income from equity accounted entities. These positive factors were partly offset by higher exploration write-offs, mainly related to exiting Bay du Nord and lower production due to seasonal maintenance in the Gulf of America.

In Customers and Products, segment underlying operating profit increased by around $1.8 billion. Within customers, profit benefited from seasonally higher volumes, higher fuel margins, a stronger Castrol performance and a slightly higher midstream contribution, partly offset by lower earnings from bioenergy. Within products, profit benefited from significantly stronger realized refining margins and a slightly higher oil trading contribution, partly offset by higher planned turnaround and maintenance activity as well as the impacts of the third-party event at Whiting in April.

Other businesses and corporate charges were around $70 million higher than the previous quarter, primarily reflecting impacts of the Ventures divestments and one-off corporate items. Taking all these factors together, group underlying replacement cost profit before interest and tax was $10.3 billion compared to $6.3 billion in the previous quarter.

Below the operating segments, the underlying tax charge increased by around $1.5 billion, reflecting higher earnings in the quarter. Group underlying replacement cost profit was $5.7 billion. We recorded net adverse adjusting items of around $1.1 billion across the segment, including post-tax net impairments of around $800 million, primarily related to transition businesses in the Gas and Low Carbon Energy segment. After inventory holding losses of around $700 million, our second quarter IFRS profit was $3.9 billion.

Moving from earnings to cash flow and the balance sheet. This quarter, stronger earnings converted into stronger cash generation, helping us to reduce financial obligations by around $7 billion. Now rather than follow the cash flow statement line by line, I want to walk through the quarter's sources and uses of cash, showing how cash generated by the business flowed through to net debt and financial obligations.

Our total sources of cash in the quarter were $13.5 billion. Underlying cash generation was $12.9 billion. This compares with reported operating cash flow of $10.9 billion, which was after $1 billion of interest payments and around $1 billion build in working capital during the quarter. I'll come back to working capital shortly. We also received around $600 million of divestment proceeds during the quarter.

On the uses of cash, the main outflows were CapEx of $3.1 billion, perpetual hybrid bonds of $3.1 billion, including the redemption of $2.9 billion and $1.3 billion of dividends paid. After these cash outflows, net debt reduced by around $3.1 billion, which brought the balance at the end of the quarter to $22.3 billion.

I now want to spend a moment on working capital, given its importance to cash generation. During the second quarter, we reported a $1 billion build. This reflected the scheduled $1.1 billion Gulf of America settlement and around $200 million for decommissioning. As a reminder, these items are not expected to reverse because of their accounting treatment.

Partly offsetting this, we saw a $700 million release for seasonal effects and pricing, taking our first half working capital build to $7 billion. Subject to the macro environment and prices, we expect $2 billion to $3 billion to unwind from here over the remainder of the year as we move through the peak demand period in customers and products. As I mentioned in the first quarter, the timing of the remaining unwind will depend on how the situation in the Middle East evolves.

The expected unwind of working capital is one important source of cash in the second half, together with organic cash generation and the remaining contribution from divestment proceeds this year, including around $6 billion from the announced Castrol transaction, it supports our path to further reducing financial obligations.

On the stated price assumptions, we expect to see financial obligations reducing to around $39 billion to $41 billion by the end of 2026. This would mean delivering our $14 billion to $18 billion net debt target ahead of plan, including our plan to repay $1 billion of perpetual hybrid securities in the third quarter. But I want to be clear that at that level, there would still be more to do. We will continue reducing financial obligations beyond 2026 with organic cash generation and further expected divestment proceeds.

As Meg said earlier, cost efficiency is a management priority and a key to improving profitability. Since 2024, we've provided greater transparency by reconciling production and manufacturing expenses and distribution and administration expenses into 2 categories: variable costs and underlying operating expenditure. Let me say a few more words on both.

Starting with variable costs, the largest components are transport and shipping, environmental and marketing and distribution. These costs are mainly linked to product movement, environmental compliance obligations and customer-facing activity within our ST&S and C&P businesses. The important point is that these costs should be assessed alongside the gross profit they help generate. We're focused on growing and optimizing gross profit, capturing revenue and margin opportunities while managing the variable costs associated with that activity.

In the first half this year, variable costs increased year-on-year, but related gross profit increased by more. So we continue to manage these costs carefully with a focus on value creation. Underlying operating expenditure is different in that it represents the structural cost base of the company. Here, we are disappointed that underlying operating expenditure is not coming down quickly enough.

Since the start of the program, we have delivered $3.5 billion of structural cost reductions, but the benefits are not yet sufficiently visible in earnings and cash flow. The actions taken so far have not been sufficient to overcome inflation, some acquired costs and the complexity of our cost base. We have identified further opportunities to optimize supply chain costs to simplify organizational structure and use technology to build a more competitive BP.

In parallel, the portfolio review, Meg described, has identified businesses where divestment can simplify BP, improve margins and strengthen the quality of cash flows. Gelsenkirchen is a clear example, an asset with a higher cost intensity than the group average. Divestment also reflects our assessment of strategic fit through cycle earnings and integration value. Our announcement to market Archaea Energy is another example. Importantly, cost reduction is an output of these portfolio decisions and not the reason for them.

Turning now to outlook and guidance. As we continue to enhance our disclosures, we are now adding production and throughput ranges to our forward-looking guidance. I won't read through all the details, but let me note some items by exception. We now see full year CapEx in the range of $13.5 billion to $14 billion, reflecting our decision to delay asset farm-downs to capture better value. We now expect full year divestment proceeds to be in the range of $8 billion to $9 billion.

To reflect the completion of the sale of the Gelsenkirchen German refinery effective 31st July, we have updated our refining indicator margin. Finally, we have updated our full year underlying effective tax rate to be around 35% to 40%. More details can be found in our appendices and supplementary disclosures on bp.com.

With that, let me hand back to Meg.

Thanks, Kate. I'm an operator at heart and pragmatic in decision-making. I'm committed to analytical rigor and an unemotional approach to the decisions to be made, including a full review of the portfolio and cost structure and a relentless focus on performance. As we work through this process, we will be transparent about what needs to be fixed and make the tough decisions to ensure we move at pace to unlock the value that is embedded in BP.

I have deep conviction this company can and will be a world-class global integrated oil and gas company. I have confidence in BP's strengths and future potential, and I'm also honest about where we need to improve. We need to convert potential into stronger, more consistent performance. How we do that is to focus, perform and grow.

BP has great assets, deep capabilities and people who know how to deliver. We will focus on the assets, businesses and markets where we have the strongest competitive positions and the clearest routes to value creation. That means simplifying the company, strengthening the balance sheet, high-grading the portfolio and allocating capital only where it can deliver competitive returns. Every part of BP has to earn its place. We need to perform more consistently safely, operationally and financially. Safety performance must improve. Costs must come down. Project delivery must be disciplined and accountability must be sharper.

We need to get BP fit for the weight class we are in today so we can compete harder and generate more cash. BP has real growth potential, but growth must be earned through a track record of delivering consistent positive returns and cash flow. We need to demonstrate that we can deliver on that commitment and do so quickly and with greater intensity. As we build that track record, we build our capacity, confidence and credibility to invest further.

Ultimately, the growth that matters most is shareholder value, growing value per share over the long-term. I and all of us at BP will ultimately be judged by the performance of the business. This is the role that I signed up for, and I'm excited for the challenge. In the first instance, that means delivering on the primary targets that we've laid out to the market. That's what my leadership team is focused on, and I'd like to acknowledge their discipline, accountability and commitment to delivery.

I'm confident we're moving in the right direction. We've made progress so far this year and have momentum going into the second half with more to come. The task is to move with urgency, accelerate delivery and build a stronger, more focused, more competitive company, one that performs consistently and delivers stronger outcomes for our shareholders and all those who rely on us. Thank you for your interest in BP.

Welcome, everyone, to BP's First Quarter 2026 Financial Results Call, which we're hosting today from our offices in Washington, D.C. I'm joined by Meg O'Neill, Chief Executive Officer; Carol Howle, Deputy Chief Executive Officer; and Kate Thomson, Chief Financial Officer. I hope many of you will have seen our 1Q video by now, and we look forward to taking questions shortly.

Before that, though, let me hand over to Meg for a few brief opening remarks. Meg?

Thanks, Craig, and hello, everyone. It's great to be here. And as I said in the video, it is a privilege to be here as BP's CEO, and I'm really excited about the opportunity ahead of us. This has been another strong quarter for BP despite a lot of external volatility and importantly, our underlying operations continue to perform well.

We produced 2.3 million barrels of oil equivalent per day, supported by continued high plant reliability, higher production in the Gulf of America and strong performance in BPX, offsetting disruptions in the Middle East and some divestment impacts. Refining availability was above our target of 96% and throughput was over 1.5 million barrels per day, our highest quarterly figure in 4 years.

In trading, our focus remains on capturing value through the cycle while operating within a clearly defined risk framework. This all supported delivery of $3.2 billion of underlying net income significantly higher than the fourth quarter and $8.9 billion of operating cash flow before a working capital build of $6 billion. We also made progress in simplifying our portfolio with the agreed sale of the Gelsenkirchen refinery announced in March, further increasing our structural cost reduction target by end 2027.

And while net debt increased this quarter, this was largely due to a build in working capital. We remain confident in delivery of our net debt target and we also announced today our plan to reduce our corporate hybrid stack by over $4 billion by the end of 2027, subject to market conditions. So continued strong operational and financial delivery and accelerating strategic progress, a lot of really great work by the team. Carol, Kate and I are looking forward to your questions.

And with that, I'll hand back to Craig to take us through the Q&A.

Thanks, Meg. I'm going to take one question per person, please. So everyone gets the chance to ask and William to wrap the call up in about 45 minutes.

So on that first question, we'll move to Josh Stone at UBS.

Meg, congratulations on the new role. I wanted to touch on something you said in your prepared remarks about going back to the traditional upstream, downstream reporting lines with a review to reduce complexity, increase accountability. Can you maybe just expand on what this means in practice of BP, perhaps where you see the biggest benefits coming from there? What needs to change internally? And also how the organization has responded so far to that announcement?

Well, thanks for the question, Josh. The decision to move towards upstream downstream model is all about changing ways of working and driving simplification, driving improved accountability and focus and speed and decision-making. And if you think about how the business operates, it's quite a different skill set. The skill set associated with finding oil and gas resources, developing and producing them is quite different from the way of thinking that's associated with getting customers the products they need, getting refining set up to deliver the product mix, be it gasoline, diesel, jet. I think it's also important to really highlight the value that we see within BP of our trading organization which allows us to maximize value from molecules as they move from refining all the way to those end customers.

But it's all about driving accountability, driving simplicity and efficiency and decision-making and the initial response from the organization has been very positive.

Thanks, Josh. We'll move next to Michele Della Vigna at Goldman Sachs.

Congratulations on a quarter that really showed mainly the strongest [Technical Difficulty] look back, Meg, at your time as CEO of Woodside, you modeled the size of that company. I'm just wondering how important do you think revamping this oil and gas growth is to the BP investment [Technical Difficulty] right?

Yes, great question. Look, one of the things that I would highlight is some of the exploration success that we've had over the past year and a bit. So we've announced 14 discoveries since the start of 2025. I think it's important, Michele, to highlight that a number of those are what I would call short cycle. So those are discoveries that can quickly be tied back to existing infrastructure. That's -- those are opportunities to bring production online at pace, which helps with mitigating production decline, which is something we, of course, always fight in the base business.

We do have other more material longer-term growth options. Bumerangue is probably the most noteworthy. It's not every day that you discover an 8 billion-barrel in place field, obviously, a bit of work to do. We need to do appraisal, but that's a significant [Technical Difficulty] part of our longer-term growth story. Complementary to the work that's underway already in the Gulf of America with the Paleogene development and BPX with onshore.

So production growth is part of our plan. But I think it's important to go back to some of the points we made in the announcement and points that Kate has been making for a while is we've got to get the balance sheet strengthened. A stronger balance sheet puts us in a position where we can make those investments in production growth through the cycle. So that's how we're thinking about the totality. I'm excited about the opportunities we have, but the focus right now is making sure we've got that laser focus on delivery every day and strengthening the balance sheet.

We'll turn next to Doug Leggate at Wolfe Research.

Meg, you've inherited a capital structure, which has been getting a lot of attention. And obviously, the hybrids get mentioned now as part of the targeted reduction in debt and equivalents. I'm just curious, from your standpoint, is there an ideal capital structure that you think of? I mean, the current environment, for example, one could argue there is a line of sight where the hybrids could be taken out completely, given the weight of the prospective cash flow you have. So I'm just curious how you think about what defines the capital structure and where you see the right balance of debt and equity on the equivalents?

Yes. Thanks, Doug. It's a really good question. So one of the things that I think about, and this is probably a very simplistic way of talking about, and I'll hand to Kate for a bit more details. When we think about sources and uses of cash, one of the things we're trying to tackle is the amount of cash that is going to liabilities. And so that underpins the work that we're doing, strengthening the balance sheet, tackling net debt, now tackling hybrids. You would be aware of the Deepwater Horizon obligations that we're chipping through and the end of the obligations is within sight just a few years down the track. So it's all about reducing the amount of cash that we generate that's going to these liabilities, which means more cash is available for investing in the future of the business and returning value to shareholders.

But I'll hand to Kate to talk about the stack in more specifics.

Thank you, Meg. Hello, Doug, good to hear your voice. Back in February, we made the decision as a Board to pause our buybacks, and that was a very deliberate act to accelerate the pace with which we were going to strengthen the balance sheet and deliver on our net debt target. Accelerating the deleverage is incredibly important. And I'm probably going to echo some of Meg's earlier comments because it does 2 things. It creates the platform for growing our company and it gives us a greater generation of free cash flow, lower financing costs and means that we have confidence in resilient distributions to shareholders and investing for growth through cycles. So those are really important.

The level of confidence that we have and the delivery of our net debt target is what has given us the space to be able to make an economic decision around $4 billion of our hybrids, which is very clearly the 2 tranches that come forward for redemption in '26 and '27. I'd go back though to the holistic view of our total financial obligations that we shared deliberately in February. We're moving at pace to reduce across that, but we will be making economically driven decisions as we step into that and rebuild the balance sheet. And that's all about how we create our platform for everything that's to come.

We will move next to Biraj Borkhataria at RBC.

Just to follow up on the hybrid stack more of a technical question. So I understand you can't talk about your intention to do more than the 25% you've announced. But in practical terms, there are obviously various call dates for the remaining bonds. Would you need to wait for those and step through those step by step or is there a scenario where if you had the disposable cash, you could do all the remaining hybrid bonds in one go? Just thoughts on that.

I'll take that, Biraj. Good to hear your voice. So just in terms of the announcement that we've made today and how to think about that. So we expect that S&P will permit the reduction under the methodology on corporate hybrids. So -- and remember that is $12 billion, the original hybrid stack that we issued in June 2020. So we expect to maintain equity treatment on that.

In terms of moving forward, I think it's incredibly important. Two things. One, hybrids remain an important and permanent part of our capital structure. And also back to what I was saying a minute ago by economically driven decisions, retiring hybrids ahead of redemption periods can be very expensive depending on market conditions. So that's something we would think incredibly carefully about. I think the most economic way to retire hybrids is to allow them to roll off as they hit those periods. And the first one comes towards us now. The window opened in March and concludes in the second quarter, hence, our guidance in terms of what we're going to be doing. And don't forget that will be part of a working capital build in the second quarter as a component of our working capital as that rolls off.

We will take the next question from Lydia Rainforth at Barclays.

Meg, welcome. I'm going to come back to this idea of talking about simplifying BP. Can you give us some concrete examples of what you actually mean? Because when I think about the upstream, downstream reorg, we're talking about simplification a lot. And then just linked to that, are the targets that BP have already set out the extent of the ambition we should think about? Or should we think about that being more than that over time? I'm not talking short term, but just over time.

Sure. Thanks, Lydia. Look, on the simplifying front, perhaps the clearest example is with the structure right now with production and operations, refining sits under that portfolio, which has been really, I think, incredibly valuable driving performance improvement in refining. And if you look at our reliability numbers, upstream, downstream are both in that 96% range. And I think that's a reflection of the value of having brought those parts of the business together. But it adds complexity, if you think about how refining fits in the value chain, getting refining right is about getting the right supply into the plants and getting the right products to customers. So much closer links to the customers and products and the mobility and convenience and aviation businesses.

So moving refining into downstream really aligns it with the flow of products and allows the leader of that business to think holistically about how do you maximize value from that front of the refinery all the way to the end customer. So I think that's a good simple example of how the upstream, downstream will drive more efficient decision-makings.

Now the targets that we've announced out to 2027 are still in place and that would represent first quartile performance across the business and in all of our support functions. But obviously, we're going to be relentless in continuing to challenge ourselves, continuing to learn, continuing to benchmark and making sure that wherever we are in the business that we continue to have that chronic drive for cost efficiency for safe, reliable operations and for best-in-class performance. That's our goal.

We'll take the next question from Chris Kuplent, Bank of America.

Welcome, Meg. can I ask a very open question. I'm sure you've been very excited for months now to arrive at BP. Can you look back and say what's been the thing that's getting you most excited about it, perhaps already last year. And since you've actually entered, what's been the most surprising thing you've encountered? And the 2 may be the same thing. So I hope I get away with asking just this question.

Sure. Thanks, Chris. Look, it's really is an honor to be part of the BP team. I've worked in a large integrated company. I've worked on a pure-play E&P. The thing that excites me about BP is the breadth of the business. So we've got world-class upstream with some really fantastic assets. We've got a very dynamic downstream and some very critical markets for our customers and then a world-class trading organization. And I think we've got all of the ingredients to be a really phenomenal company. And kudos to the team. We've been on a journey for the last couple of years trying to make sure that we are delivering on the potential of the organization. So I think there's opportunity to continue that journey to bring a bit more momentum to the decisions and the progress that the team has been making over the past year.

In terms of most surprising, look, I'd say it's been really a warm welcome, which isn't surprising, I think BP's culture of care is well known. But seeing the kind of commercial capability up close and personal, which I'd only ever seen across the table as a joint venture partner, and we've got some really, really capable people here. And I think we've got all the raw ingredients between the assets and the talent to deliver on the full potential of the corporation.

We'll take the next question from Henry Tarr at Berenberg.

I suppose to come back to something that was asked earlier, I think you sort of referenced a stronger and simpler BP. As you look at the business, are there particular sort of core regions or assets that you think are very strong. And then perhaps others which might seem even after the divestment program that aren't quite as core? And then within that, how do you view sort of BPX as part of the portfolio?

Sure. Thanks, Henry. Look, you sort of spotlighted one of the core assets. Our Americas position really is world-class. If you look across the breadth of the business. the U.S., and as Craig said, we're doing this call from DC. The U.S. is incredibly important. All parts of the business are present here from upstream, onshore, offshore, downstream, trading. So we've got a very significant footprint here in the U.S. and a lot of our future growth is coming from the U.S. between the Paleogene and BPX.

Going south from here, Bumerangues, again, a very significant discovery, 8 billion barrels in place. So that will be an important part of the business as we move forward in time. And then some of our core areas, the Middle East and AGT. We've got some real high-quality assets there. So I think there's a lot of strength in the business as it stands today. Now the team has been doing tremendous work already looking at assets and parts of the business that might not be core to our long-term journey, and kudos to the organization for getting the Castrol deal across the line late last year. You would have seen the announcement of the Gelsenkirchen refinery divestment.

So every business needs to chronically be asking ourselves what are the assets that are with us for the long term and what are things that might be of greater value in some else's hands. And that's a good chunk of the work that Carol is going to be doing as Deputy CEO.

We'll take the next question from Martijn Rats at Morgan Stanley.

I wanted to ask you 2 things. It feels like a bit of a missed opportunity not to ask you about Iraq. BP is such a large operator there with the Rumaila field. I was wondering if you could give us your thoughts on sort of if the Strait of Hormuz were to be opened, what are we looking at in terms of the steps that need to be taken to kind of ramp up production? What does that operationally require the logistics of the supply chain? How much time would that take? I'd be really interested in your thoughts.

And the second thing I wanted to ask has some longer-term strategy implications. There's real [Technical Difficulty] earnings on a quarterly basis from BP's trading business. And of course, if you have physical assets trading, sometimes trading opportunities naturally arise and a company like BP should take advantage of that. But it also -- but if the trading business grows over time, there was also a point where it sort of chart tried to change the nature of the company a bit. I mean, you can from an asset company with some trading, it can become a trading company with assets, if you see what I mean. And I was wondering if, given that you've taken a fresh look at BP, what do you think is the natural size of the trading business within the company? At what point does it become too large perhaps?

Martijn, there's definitely more than one question in there. So what I am going to be pretty deliberate. We'll take your first question on Iraq. And then I'm sure the question on trading may come back up. I do want to make sure we get through everybody. So maybe Meg on Iraq, and I'm sure somebody can ask about trading and ask Carol.

Sure. Well, thanks for the question, Martin. So I think we put it in the presentation. Our total production from the Middle East is around 400,000 oil equivalent barrels per day. We have historically exported about 100,000 barrels per day through the Strait of Hormuz, which includes barrels from Iraq and some barrels from Abu Dhabi. It's worth noting that we've also been able to lift some Abu Dhabi production from the Fujairah terminal.

Look, the Rumaila field is operated by the Rumaila operating organization. We have involvement as a technical services contractor. So questions on what it's going to take to get that back online are probably best directed to the operator. But we stand by ready to work closely with the Iraqi government and with the operator to provide the advice and insights we can on getting the field back online as soon as possible once the shipping restrictions are lifted.

We'll turn next to Lucas Herrmann at BNP.

Meg and the team actually best of success with everything. I want to ask a question on LNG, LNG trading, probably directed at Carol. So if I go back to 2022, the company very proudly talked about the redirection of 200 or so cargoes. And one of the features I understand of your contracts is 90% are written with redirection clauses. If I think about the -- if I think about the environment we're in now, the volatility, the spreads that one can see today, how do I think about your ability to maximize that? To what extent is there length in the portfolio? To what extent are you starting to enact those clauses on the basis that my initial presumption was correct? Carol, any guidance would help.

Lucas. You know we don't give guidance. So -- but no, good to hear from you. And so with regards to the LNG portfolio, you're right. So we can redirect our cargoes, more than 90% of our cargoes are reoptimized prior to final delivery. What I would say is we're still growing our LNG portfolio. So last year, we had just under 27 million tonnes per annum in terms of the strategic portfolio, which is up year-on-year and around 15 million tonnes of what we call the sort of incremental merchant volumes. So there's growth in that portfolio.

There's also great diversification in the portfolio. So if I look at it in terms of our ability to rewire and think about where we can get supply into, as you say, these demand centers, particularly with the disruptions that we're seeing, we have supply from Trinidad, from Mauritania, Senegal from the U.S. and also from Coral in Mozambique, all of which we can look to optimize to make sure that we get LNG to customers. So we still run the portfolio in that way. We are still looking to make sure that we optimize BP's assets as well as support customer flows and deliveries. So on that basis, we continue to work through that. I think 2022, just to finish off was a little bit different in terms of we did see prices -- TTF prices surged about 300%. And last quarter, it was around 100%. So slightly different levels of volatility, but the fundamentals of the business are still the same.

We'll move next to Alejandro at Santander.

Best of luck, Meg, with your new challenges. My question is about when looking at the market expectations of your role making in the company that could provide a boost in terms of the strategic delivery of the company. In which area of the -- which of the key targets of the company in terms of divestments, in terms of cost cutting, in terms of a stronger balance sheet, you see more upside in the company today?

Yes. Thanks, Alejandro. I appreciate the question. Look, I think there's opportunity, and the team is focused across the breadth of the business. And one of the things that I'm very focused on is ensuring that we're capturing maximum value from all of the assets we have in our portfolio today. And you talk about -- and one of the things I like to frame is there's some big rocks, things like the Castrol transaction that has a material positive impact on the balance sheet, but there's lots of work that the teams can do every single day to increase value to BP shareholders. That's working on reliability. It's things like well optimization, making sure we've got the right slates running through the refineries to get the products that the customers need and that offer the best value for BP shareholders.

So I think there's a tremendous amount of work to do to continue that focus on safe, reliable, cost-efficient operations to relentlessly drive to be cost efficient across the business, and that includes the above field or staff functions. The trading business really is world class, and I think you're seeing the positive impact of that part of the business and the results today.

And so I'm focused on -- it's a bit of all of the above. The balance sheet repair is critical. And again, it's about trying to make sure that we have more of the cash that we generate available for investing in growth and value to shareholders. So that, at the end of the day is something that's going to be a critical focus for the leadership team for the coming couple of years.

We'll take the next question from Matt Lofting at JPMorgan.

And Meg, welcome to BP, wishing you the very best of luck. I think you spoke earlier in the video released earlier today on creating durable cash flows. I wondered if you could just unpack that a little bit in terms of how you and the team are thinking about that over and above baseline returns and some of the metrics that perhaps go into thinking about that?

Yes. Thanks, Matt. Great question. So one of the things that I think we're all quite aware of is the fact that we are in a very cyclical industry. We produce a commodity that if you look back over the last 6 years, has had some pretty extreme price volatility. So we need to make sure that the decisions we're making on the portfolio and the business allow us to be profitable through the cycle and to be able to have that same disciplined approach to investment through the cycle.

So it means when prices are high, we remain disciplined. We continue to have our belt tight on operating expenditure and capital expenditure. And that is the sort of thing that will serve us well when there's a lower price environment. It means stress testing, the investment decisions we make, stress testing the portfolio, making sure that, again, we have that resilience to a low price environment.

Kate, did you want to elaborate on that?

I guess maybe a couple of points. I think the portfolio gives us quite a degree of diversification in a number of dimensions, based in terms of product versus geographical exposure, fiscal exposure. And I think that is part and parcel of being resilient. In terms of further upside, I think one area of focus that we've been working hard on as well is around the capital frame. So I think it's incredibly important at moments like this that we keep tight control on CapEx. And then the focus is on excellent execution against the dollars that have been put to work in the various parts of the business.

We'll take the next question from Jason Gabelman at TD Cowen.

I wanted to go back to the capital structure. And it seems like the balance sheet, the way things are moving, can not only meet the target, but potentially exceed the $14 billion debt target when you account for the Castrol sale. So how do you think about the right size for the balance sheet? Do you think that $14 billion is the floor? Can you kind of go below that as you think about developing some of these high-quality assets that you have in the hopper? And more broadly, should we expect larger capital framework update now that Meg has taken over?

Shall I take that? Jason, so in terms of capital and the $14 million to $18 million, look, that's our primary focus right now, the delivery of that, and there are various components that will deliver on that, not least the closing of the Castrol transaction, which we've said will likely close towards the back end of 2026. I think it's incredibly important. We remain focused on delivery of that is the primary target. But as you can see from what we've said today, we are also reducing our hybrid stack, which drives lower financing costs in that dimension. So we'll continue to optimize on that.

On CapEx, we have set a frame of $13 million to $15 million for the next 2 years. I think that feels right. I think it's the right capital structure to maintain and grow the company. And right now, as I've just said a minute ago, I think keeping tight control on that space is very, very important. And this year, we've tightened it further to $13 million to $13.5 million. That feels good. It's the right balance around investing in the core parts of the business as well as focusing on and growing some of our future production that you can see coming online. And Meg referenced some of the short-cycle stuff. We're also investing in some of the longer stuff, but that's about creating the right balance.

We will take the next question from Fergus Neve at Rothschild.

I just wanted to go back to exploration, which you touched on briefly earlier in the call and is a real interest at the moment in the industry. You've announced discoveries in Egypt and Angola this year. And I think the solar well offshore Libya was being drilled when we all met for the 4Q results, which was a well, you were quite excited about. I wonder whether you could give us an update on your exploration activity so far this year and a look ahead of any other wells we should be looking out for as the year goes on.

All right. Well, thanks, Fergus, and I appreciate the interest in exploration. It is one of the key engines to get new opportunities into the front end of the business. So I'm very pleased with the success that the team has had over the past, call it, year and a quarter. As we said, 2 discoveries, so good progress in Egypt and Angola.

Egypt is a great example of discovery that's very close to existing infrastructure, so something that has that ability to be commercialized at pace. Matsola, you may have heard from our partner in that. It was a noncommercial discovery, but it is in a very big and diverse basin with a number of prospects, and we have further exploration opportunities in Libya that we will be pursuing over the course of the coming years. Perhaps another one to watch is we'll be drilling another well in Brazil on an exploration prospect there ahead of doing the appraisal drilling on Bumerangue. So those are probably some of the ones to be watching out for over the course of 2026.

And we'll take the next question from Kim Fustier at HSBC.

Kate, you flagged that the difference between the refining indicator margin and the realized margin could be greater than $5 a barrel if current conditions persist, driven by crude differentials, product yields and freight costs. Are you able to give any more color on those 3 components? And I guess, is there anything you can do to capture more of the margin and mitigate any headwinds? Can you do things like tweak refinery product yield towards more jet and diesel?

Yes. So I'll take that, Kim. Thank you for the question. Yes, what we're trying to do here is give as much help as we can to the market in terms of how to think about rules of thumb in what are pretty unusual circumstance regarding our basket of commodities. We've described the fact that the rim is a little bit dislocated from realized margins right now in terms of realized margins being below the refining indicator margin. And I've said 3 things that contributing to that. One is feedstock availability. One is product yields. It's volatile. We are producing output that I would describe as different from standard, and that's very much about trying as much as we can to create products that our customers need around the world and then ship it to those destinations. And then of course, we've got higher freight costs.

In terms of where we're seeing it the most, so it's -- at the moment, we're seeing it more in Europe than anywhere else. But as you would appreciate, this remains an incredibly volatile situation. I'm not going to predict how the next couple of months will unfold. We will give as much color as we can once we get to the trading statement for the second quarter, try and describe how it's actually manifested.

Super thanks, Kim. And this is the last question. I'll make the offer, given we have time to come back to Martijn for his follow-up after this question. But Mark Wilson at Jefferies.

Okay. BP has seen very strong exploration success in recent years and conversion of that discovered contingent resource into reserves is what changes reserve life in years, which has been a focus for various companies in the sector. I would say less of a focus for BP, but BP's reserve life is lower than the average. Could I ask you therefore, Meg, what's your view of a healthy reserve life number for modern IOC? Should it -- does it have to be double digit? Or does technology cycle time improvements, et cetera have changed that number fundamentally?

Well, thanks for the question, Mark. Look, I think we've been pretty upfront about the journey we've been on. We went through a period in the early 2020s, where we were not exploring as actively. And we've made some adjustments in the last couple of years to refocus on this core approach to bringing new opportunities into the business. We've also signaled that we want to be getting our reserve bookings up. Good progress was made last year.

Kate will remind me of the number?

90%, of which about 15% was due to price. So if you back out price, it was about 76%. That was a material improvement.

Yes. So we are making good headway in replacing produced reserves, and we've set ourselves a target of 100% reserve replacement by 2027. So the team is very focused. As I said, this is a core method for growing the upstream and continuing to refill those opportunities and something we're laser-like focused on.

Thanks, Mark. Okay. We have 8 minutes before the end of the call, and I'm going to turn back to Martijn for his question, which will be pointed at Carol. And then we do have 2 follow-ups that I think will take us to the end. So maybe, Martijn, you first, and then we'll get to Lydia and Alastair for the follow-ups.

Yes. Thanks, Craig. Look, the question is simply what you think is the -- broadly the right size of the trading business within BP. It's large enough to capture the opportunities that there are, but not so large that it starts to dominate other things. Yes, that was the question.

Yes. No. And thank you. And what I would go back to is the main or the sort of core objective of the supply trading and shipping business is to support BP's assets. So we're there to make sure from a production perspective, we keep our molecules flowing and we improve netbacks. We're there to make sure that we keep the refinery supplied with the best feedstocks. We're there to make sure that we can also help deliver those products to the market, whether that's wholesale or into the retail businesses or into the aviation businesses. So that's the core objective that we have.

Then it's around building a merchant portfolio on top of that, that optimizes all of those flows or allows us very sort of as we've talked about before, capital-light opportunity to access growth markets where, again, we can look to improve the returns on our refined products or indeed our upstream production.

Then the trading piece, the pure trading piece is the sort of the icing on the cake, I would say. And that is subject to volatility. It's obviously subject to us managing that very closely and from a risk perspective, from a disciplined perspective. But really, Martijn, I mean, we're here to serve the BP assets. So we're not there to be trading for trading's sake. Our primary goal is to serve BP.

I will go next to Alastair who hasn't asked a question first. So Alistair at Citi.

I was actually going to ask another trading question to Carol, I guess, within the boundaries of what you're prepared to talk about commercially. But can you sort of explain to me why the oil trading result in the quarter was exceptional and the gas trading on average? I mean I was kind of under the impression that both commodities moved directionally in the same manner and on pretty much the same external events. So why they relative?

I mean, so the first thing I'd say is that as we've all seen, in a significant structural tightness due to the conflict and also due to the closure of Strait of Hormuz. And what we've seen is on the oil side, we've seen the disruption come through on crude, and we've seen it also come through on refined products, both in terms of impact to the Middle East, but also a reduction in refinery runs in Asia. So that's meant we've seen a shortage of supply in Asia, which has been also gradually rolled through into the West.

Now what we've been doing on the oil side is really very much, as I said, focused around making sure that we keep our production flowing. We keep our refineries wet. We keep our refineries producing a maximum yield with regard to where we're seeing the shortage of products for our customers, which would be across jet and diesel. So we've been doing that. We've got a global scale and a diverse portfolio across a number of different geographies that we've been able to rewire supply and demand across. And that's where you've seen that value coming through on the trading side.

With regards to the gas side, I think as I mentioned earlier on the call, we haven't seen the extent of volatility because I think sometimes people sort of equate this to 2022. We haven't seen the extent of volatility in those gas markets as we saw previously. Now what we are watching though and monitoring very carefully are things like the EU stock levels. We're looking at where they should be against the 5-year average. It is injection season. So we're watching that very carefully. Obviously, continued disruptions to Strait of Hormuz has the potential to increase the shortages that we're seeing in the market. But again, as I said, I think, in answer to Lucas' question, the portfolio that we've got across BP and merchant does have the diversification in it to make sure that we work very closely to meet our supplier commitments.

We'll come back to Lydia at Barclays.

Craig, I appreciate the second chance. And I was just going to come back to Kate and Carol, if I could. I mean just obviously, there's been a lot of changes over a number of years. Can you just talk about through now how you work together as a management team? And partly linked to that, Kate, I mean, just given another restructuring side of upstream, downstream, are there going to be more restructuring charges that we should think about having to put in? Or is this generally additive from where we are?

Restructuring...

Do you want to take restructuring...

So look, Lydia, we do provide updates on restructuring charges. We'll do a deep dive into costs generally at the second quarter. I think one comment I would make is I'll take the opportunity with the mic to say that we've continued to make good progress on our structural cost reductions. We have now delivered another $300 million. So we're 70% delivered against the 4% to 5% that we originally set out.

In terms of restructuring costs, I think it's really important that right now, we get the organization of the team inside the company right, and we will step through that at pace, but in the right way. And we'll obviously be engaging with our people, first and foremost, before we pay anything else externally. Everything else will flow out of the consequence of how we structure the company and how we run our teams.

And then I think from the sort of leadership perspective, as Kate and I talked about earlier in the year, we very much have been working as the management team around sort of turnaround of BP and you've seen that delivery coming through on the performance side, on the operational excellence side and obviously from the financial perspective and the progress against our core targets.

I do think and Meg will probably be embarrassed for us saying this, but she's a fantastic leader. And I do think actually having her in the organization and bringing in that external perspective, both challenging us where we could be better because I do think BP has more upside but also supporting us and engaging us in, I think, a very different way. And one of the webcasts from a staff perspective, the feedback at the end was very much around confidence, pride in the organization and clarity. And I think that's what you'll see from the management team going forward.

Okay. Well, I'm going to sneak in 2 more and then we'll aim to finish pretty promptly. So Jason Gabelman's re-pulled at TD Cowen, Jason.

Maybe 2 quick clarifying questions. Is there any risk to your European refineries access to crude? Or do you feel like those are well supplied? And can you just talk about how you think about Middle East investments and if you need a higher return given the higher risk we're seeing in the market?

I mean on crude supply, I mean, we're working very hard to keep our refineries supplied. We have a wide range of both upstream positions but also merchant positions. And so we're able to diversify the slate into our refineries. So we're not seeing an issue there. But as I say, the team are working very hard to do that and to make sure that we're then supplying our customers.

On the Middle East question, BP has been in the Middle East for 100-plus years. It's a core part of the company's footprint and everywhere we go around the world, we're always looking at opportunities and risks. It's in the DNA of what we do is managing a wide variety of risks as we make our investment decisions.

And then final quick question from Doug back at Wolfe.

And Meg, I inadvertently forgot to say my words of welcome as well. We're very much looking forward to working with you and good luck. However, I have a very specific question. As a lifelong upstream professional coming into an organization that has just announced 8 billion barrels of oil in place with 1 well, I think, as Ariel described it in an area the size of London. Are you concerned about market perceptions? Is there any scenario in your mind where there is not a development at Bumerangue?

Look, I saw the Bumerangue announcement, of course, when I was on the outside and thought, okay, this sounds big, but you always need to dig in with some -- with a critical eye. I've had the opportunity to sit down with the Bumerangue team, see the seismic data, see the well logs, understand what they're doing in terms of the appraisal plan and the development concepts that we're maturing. So obviously, a bit of work to do given the size and complexity of the resource. So the appraisal plan will be really critical to firming up our understanding of not just fluids in place, but how fluids will move through the reservoir and how we might commercialize it.

But very impressed with the quality of the team that we've put on this opportunity. The leadership moves at pace to get some of our best folks on to this so that we can move the opportunity forward with an appropriate amount of pace. So I'm -- look, I'd say I'm excited. It's not every day that you discover a field of this size and quality. So great opportunity for us and great -- pleased with the commercial terms that we have for the opportunity as well. So we've got all the right ingredients.

That's the end of the questions. We'll wrap up the call, but maybe if I can just hand over to Meg for some closing remarks.

Excellent. Well, thanks, Craig, and thanks to everyone for joining us on the call. It's been great to have a first chat with you, and I look forward to getting to know you over the coming weeks, months and years. I'm really pleased, again, with the strong quarter operationally and financially and the good work we're making on delivering on our strategic goals. The priority we have across the management team and the organization is to accelerate progress with that really tight focus on safe, reliable operations and capital discipline.

As you've heard, I think, quite consistently, and Kate has been leading this since before I arrived. We need to have that really rigorous focus on strengthening the balance sheet. And that means we need to stay disciplined in our spending and our investments, and that will allow us to build a more resilient BP.

So just closing, and I know it's a month in, this really is a great company. We've got remarkable people, world-class assets, and I'm super excited about the opportunity ahead. So thank you all.

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.

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.

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.

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.

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.

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 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?

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.

Thank you, Michele. We'll go to Martijn Rats just in the second row there, please. Martijn?

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.

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.

I'm going to go over to this side. Chris Kuplent, please.

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.

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.

Okay. I'll stay on this slide, Josh.

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?

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.

Go back over this side, Doug.

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.

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.

Thank you, Doug. Lydia.

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?

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.

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.

Gordon, do you want to talk capital efficiency?

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.

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?

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?

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.

Thanks, Paul. This slide, Alex.

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.

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?

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.

Okay. Thank you. One more question, yes.

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?

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.

Thanks, Mark, for your question. We'll go over to the side, Biraj.

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?

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.

Thanks, Biraj. We'll stay in this side. Irene.

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?

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.

Okay. Thanks, Irene. We don't have any further questions online. So we'll stay in the room. Is that Al 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?

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.

Thanks, Alastair. No questions on this side. I'm going to round 2 then. Lydia the front, please.

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?

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.

Super great. We'll go stay on this side, who definitely are the keenest with Lucas there, please.

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.

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.

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.

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.

[ 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.

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.

Okay. We'll move over to this side, Maurizio.

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.

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?

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.

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.

Yes, Josh, and then we'll come back to the phone.

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?

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?

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.

Thanks, Gordon. We'll go to the phone follow-up question with Paul Cheng. Paul?

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?

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.

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.

Thanks, Kate. We'll come back to the room. A question at the back with Matt.

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?

Should I take that one?

Yes. Why don't you.

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.

Thank you. Take one more question from Doug. And then Chris will come to you.

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?

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.

Thanks, Doug. We're going to take 2 last questions, one from Chris and then one at the back.

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?

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.

Great. Thanks, Chris. And final question at the back there.

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?

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?

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.

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.

Hello, everyone, and thank you for your interest in BP's Fourth Quarter 2025 Results. I'm here with Kate Thompson, Chief Financial Officer. This video presents our full year and fourth quarter financial results. And later this afternoon in London, we will have our live presentation to discuss our full year performance and strategic progress in more detail. In this video, 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. Over to you, Kate. Thank you, Craig, and hello, everyone.

2025 has been a year of strong progress and delivery of the plan we set out 12 months ago to turn our company around and deliver against the reset strategy. I want to start first with safety, our #1 priority. Tragically, in 2025, 4 colleagues lost their lives while working in our U.S. retail business. 2 were killed in separate incidents where they were struck by passing vehicles as they carried out emergency roadside assistance.

In response, we have permanently stopped providing roadside assistance next to active traffic lanes. Our thoughts remain with the families of those who lost their lives, and we will learn from every incident. On process safety, we continue to make progress in reducing events, which Carol will talk to later today. We recognize we are never done on safety, and our commitment is unwavering.

Looking at highlights for the year, we have delivered strong operational performance and underlying financial results this year against the backdrop of a weaker oil price environment. 2025 total underlying replacement cost profit was $7.5 billion, enabled by a record high upstream plant reliability and refining availability, partially offsetting market headwinds. Operating cash flow was $24.5 billion, including a $2.9 billion adjusted working capital build in the year. We have demonstrated capital discipline and efficiency with a 10% reduction in capital expenditure compared with 2024 and organic CapEx reduced to $13.6 billion.

Including the fourth quarter dividend of $0.0832 per ordinary share announced this morning, shareholder distributions were around 30% of our 2025 operating cash flow. The Board has decided to suspend the share buyback and fully allocate excess cash to accelerate strengthening of our balance sheet. This creates a stronger and more resilient platform to invest with discipline into our distinctive deep hopper of oil and gas opportunities.

The guidance for shareholder distributions to be in the range of 30% to 40% of operating cash flow is now retired. Operationally, we have had a strong year across the group. We started up 7 new major projects and set a new record in upstream plant reliability. This supported broadly flat underlying production versus 2024, exceeding our guidance from 12 months ago.

Our reserves replacement ratio was 90%, up from an average of around 50% in the prior 2 years. Our initial estimate of the Bumerangue discovery, our largest in 25 years, is that there is around 8 billion barrels of liquids in place. And as is normal at this stage, there's a wide range of uncertainty around this estimate. We are now putting plans in place for an appraisal program, which is expected to start around the end of the year.

We also concluded the strategic review of Castrol with an agreement to sell a 65% shareholding. Expected total net proceeds to BP of around $6 billion will be fully used to reduce net debt following completion. This means we've completed and announced over $11 billion of divestments, more than halfway towards our $20 billion disposal program in only 1 year. And our supply trading and shipping business has now delivered around 4% uplift to BP's returns on average over the last 6 years.

We have delivered good progress against the primary targets we laid out at our Capital markets update 12 months ago. We've increased adjusted free cash flow by around 55% in 2025 on a price-adjusted basis. Net debt at the end of 2025 was $800 million lower than at the end of 2024. And during the year, we also redeemed $1.2 billion of perpetual hybrid bonds and made $1.2 billion of pretax payments against our Gulf of America settlement liability.

We've now delivered $2.8 billion of our $4 billion to $5 billion structural cost reduction target since the start of the program. And reflecting the outcome of the strategic review to divest Castrol, we've now increased this target to $5.5 billion to $6.5 billion by 2027.

Return on average capital employed was around 14% in 2025 on a price-adjusted basis, and that's an increase from around 12% in 2024.

Let me now turn to our fourth quarter financial results and starting with earnings, which were impacted by a broadly weaker price environment versus the third quarter. In Gas and Low Carbon Energy, the underlying result of $1.4 billion compared to $1.5 billion in the third quarter reflects lower realizations. The gas marketing and trading result was average.

In oil production and operations, the underlying result of $2 billion compared to $2.3 billion in the third quarter reflects lower realizations, the impact of production mix and a lower share of net income of equity accounted entities, partly offset by lower exploration write-offs. In customers, the underlying result of $900 million compared to $1.2 billion in the third quarter reflects seasonally lower volumes and weaker midstream performance. Fuels margins were broadly flat compared with the third quarter.

In Products, the underlying result of $500 million was broadly flat, reflecting stronger realized refining margins, offset by the impacts of lower throughput because of higher turnaround activity and the temporary impact of an incident at the Whiting refinery. The oil trading contribution was weak.

Taking all these factors together, group underlying replacement cost profit before interest and tax was $4.4 billion. So below the operating segments, our underlying finance costs were around $1.2 billion, broadly in line with the third quarter. Our underlying effective tax rate in the fourth quarter was 43% compared to 39% for the previous quarter, reflecting changes in the geographical mix of profits.

For the full year, our underlying tax rate was 42%. Our noncontrolling interest was around $300 million, $50 million lower than the third quarter. Noncontrolling interest will continue to vary with the business results where we do not own 100%. As a reminder, the divestment of our noncontrolling interest in our U.S. onshore midstream assets at the end of 2025 is projected to drive a charge in the range of $100 million to $200 million per annum.

Taken together, we reported group underlying replacement cost profit of $1.5 billion. As guided in our trading statement, this quarter, we have recognized impairments of around $4 billion after tax. This, together with an inventory holding loss and other adjusting items resulted in a fourth quarter IFRS loss of $3.4 billion. These impairment charges are related largely to our transition businesses, including biogas and renewables, where we took the deliberate decision to manage our pace of growth and high-grade our portfolio to maximize returns.

While these are noncash adjustments in our financial results, we recognize that every impairment reflects a prior capital outlay. We are 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.

Turning to fourth quarter cash flow and the balance sheet. Operating cash flow was $7.6 billion, including about $900 million adjusted working capital release for the quarter. Excluding the working capital release, our cash conversion improved this quarter by 6 percentage points. CapEx in the fourth quarter was $4.2 billion, of which $600 million was related to the deferred payment for the BP Bioenergy transaction, which completed in 2024. Organic CapEx in the fourth quarter was $3.5 billion, which is $700 million lower year-on-year, reflecting our commitment to capital discipline and efficiency.

Divestment and other proceeds received in the quarter was $3.6 billion, bringing the full year to $5.3 billion and exceeding our initial expectations set out at the start of the year. Taken together, our fourth quarter cash inflows exceeded our cash outflows, resulting in a reduction in net debt to $22.2 billion.

Turning to guidance and starting with the first quarter of 2026, we expect reported upstream production to be broadly flat. In customers, we expect seasonally lower volumes. And in products, we expect lower industry refining margins, partly offset by a lower level of refinery turnaround activity and CapEx to be broadly flat to the fourth quarter of 2025.

In terms of the full year 2026 guidance, reported upstream production is expected to be slightly lower. We expect underlying production to be broadly flat. And I'd note this is higher than the expectation we gave this time last year. Within this, we expect oil production and operations to be broadly flat and gas and low carbon energy to be lower. In customers, we expect lower underlying operating expenditure driven by structural cost reductions, partly offset by the earnings impact of completed and announced divestments, including, for example, Netherlands mobility & convenience.

In Products, we expect significantly lower level of turnaround activity. And capital expenditure for the year is expected to be in the range of $13 billion to $13.5 billion weighted to the first half. Divestment proceeds are expected to be in the range of $9 billion to $10 billion, including around $6 billion from the announced Castrol transaction.

Total proceeds for the year are expected to be significantly weighted to the second half. Reflecting the timing of these factors and of course, subject to macro environment and prices, we expect net debt to firstly increase through the first half of 2026 before falling significantly in the second half. You can find the complete guidance on this slide and in our stock exchange announcement.

In summary, this was another strong quarter of operational performance and underlying financial performance. We are taking decisive action to high-grade our portfolio and strengthen our company, including the execution of our disposal program and the decision by the Board to suspend the share buyback and to fully allocate excess cash to accelerate strengthening the balance sheet.

The decisions we're taking position us to deliver long-term value growth through the distinctive opportunity set we have created in our Upstream business. Carol, Gordon and I look forward to providing further details this afternoon on our strategic progress and how we are in action in driving long-term shareholder value growth. Thanks for watching.

Welcome, everyone, to BP's Third Quarter 2025 Results Call, which today we're hosting in Abu Dhabi. We'll be focusing today's call on the third quarter results and the contents of the video that I hope many of you will have seen by now. But before we move to Q&A, let me firsthand over to Murray for a few brief opening remarks. Murray?

Thanks, Craig, and thanks, everyone, for joining the call today. We're now 3 quarters into our 12-quarter plan and have delivered another strong quarter of operational performance and strategic progress. Earnings and cash flow generation was good with underlying pretax earnings of $5.3 billion and underlying net income of $2.2 billion. And with $7.8 billion of operating cash flow delivered this quarter, we are making good progress in delivering on our growth target for adjusted free cash flow growth of 20% CAGR over '25 to '27.

Our operations teams are doing a great job in running the assets well with upstream production increasing by around 3% quarter-on-quarter, supported by upstream plant reliability at around 97%, leading to upgraded full-year underlying production guidance and refining availability also close to 97%, the best quarter in 20 years for the current portfolio. Looking ahead, we're also making strong strategic progress.

We've started up 6 new oil and gas major projects in 2025, 4 of which were ahead of schedule. And we've had 12 exploration discoveries so far this year, including Bumerangue in Brazil, where the latest analysis and results gives us even further confidence. This performance is also showing up in the downstream as well.

Underlying earnings in the first 9 months were around 40% higher than the same period in 2024. In customers, we delivered our highest 3Q on record and refining captured a better margin environment. We're making good progress on derisking our $20 billion divestment proceeds target, today upgrading our proceeds guidance underpinned by proceeds completed and announced this year that are expected to be around $5 billion.

We're staying disciplined with our capital investment with organic CapEx on track to be below $14 billion. And we remain confident in the momentum we are building in support of the delivery of the cost and net debt targets we have laid out. In summary, while there remains a lot of volatility, we are staying focused on what we control, underpinned by a laser-like focus on performance across the company.

We have world-class assets and capability with operations delivering strongly. We have a deep resource base and are building high-quality options for growth in the future, the focus of our ongoing portfolio review. We're continuing our momentum to drive -- in our drive to reduce costs. we're making good progress in growing cash flow and returns and our plans to strengthen the balance sheet. And of course, we have more to do. All of this is in service of growing shareholder value and returns.

With that, I'll hand over to Craig to take us through the Q&A.

[Operator Instructions] So I think we'll start there with taking the first question from Al Syme at Citi.

Murray, I got a question on Bumerangue. I'm really intrigued by the decision rather to publish the map on Slide 9. Clearly, there's a lot of market interest in the discovery, but at the same time, it's quite early days to be publishing a map. Can you talk about the confidence in that geological map based on the data you've got? And I'm also intrigued to know whether that sort of image looks any different to the predrill assessment that you had in the field.

Yes. Great, Al. Thanks very much. Yes, we're feeling pretty good about Bumerangue right now. As we disclosed recently, 1,000-meter column, 100 meters at the bottom of oil and 900 meters of rich gas condensate. We've evaluated about 2/3 of the samples in the labs, and we continue to evaluate them. The map we've produced is off the predrill seismic.

There's a lot of technology that's changed over time, and the pre-drill and post-drill are pretty close to each other. The guys were able to image the top and bottom of the reservoir within a couple of feet based on the quality of the seismic we had. So we're feeling pretty good about it. It's a pretty good aerial view of it, 30 -- at least 300 square kilometers, at least 1,000 meters of column height, and we continue with the lab sampling.

We will update the market in due course once we understand the gas oil ratios fully and once we understand the volumes in place. And we've secured a rig to drill the next appraisal well and do a flow test on it as well, which we expect to happen once the equipment is available near the end of next year. So good news on Bumerangue. Thanks for the question.

We'll take the next question from Alejandro at Santander.

The question is about Castrol, the process, the strategic review of this asset. If you can give us some color about how the process is going.

Great. Thanks, Alejandro. I'll take that one again. First, just a small note of congratulations to Emma and Michelle, who run the business. It's 9 quarters in a row of increase in earnings, very strong performance out of that business, and it's going very well.

It's a commercial process, so I won't talk much about it other than to say there's strong interest. We are moving at pace, and we'll update you in due course. You'll remember that any proceeds that come from the strategic review will be dedicated to the balance sheet. But strong interest. We're moving at pace, and we'll update the market when we have something to say to the market directly about it.

We're going to take the next question from Irene Himona at Bernstein.

Congratulations on the numbers. Murray, can you give us an indication of an approximate timing for making concrete announcements to the market on the further portfolio simplification and restructuring, which you referred to in your comments, please?

Great. Thanks, Irene. Thanks for your kind words. On the portfolio review, Albert New Chair is on board now. We're starting to work with him on thinking about the portfolio. Of course, this comes about because we've had such tremendous success inside exploration. When we set out our plans in February, we didn't imagine that we'd have 12 exploration discoveries in a year.

We certainly didn't imagine we'd have a discovery like Brazil as well. So that's all good news. We, of course, as a corporation, are very focused on making sure that we drive for value and returns and allocating capital to the highest quality opportunities. And that's what we're commencing now. We plan to update the market as we go along. So if you think about what happened in the third quarter, you saw that we made a sanction decision on Tiber in the Gulf of America, which we're very happy with. You saw that we decided to divest the Culzean field in the North Sea.

We feel that it would have more value in other people's hands. And you saw that we stopped the Rotterdam biofuels refinery. It just didn't -- it didn't compete on a returns basis in our portfolio. So we'll update as we go along, Irene, and you should expect us just to update us as we go along through time and the decisions that we make. Thanks for your question, Irene.

We're going to take next question from Lydia Rainforth at Barclays.

So can I just come back to Bumerangue, if I could. Just on -- what I'm getting back is a lot of, well, it might not be 300 square kilometers, you may only be able to access half of that, the CO2 content. And like every is trying to talk it down.

So just to take a step back and just on your earlier answer, Murray, the idea of the commerciality, that was really the main message that you wanted to share with us some update last week. And then secondly, just a very different topic on AI and the cost base. We've seen lots of examples here in APAC around just agentic AI, what we've seen there. Can you just talk us through what -- how you think the deployment is going within BP? And you talked about wanting to reduce the complexity of BP, improve the simplicity. So can you just walk us through where you think you are on that journey?

Yes. Thanks, Lydia. Just on Bumerangue, I think the principal thing to focus on is that there's an awful lot of oil and condensate in the column. It's a large column. We've updated it from 500 meters to 1,000 meters based on the logs and the strong response we've got inside the logs and the samples. We do have the 100 meters of oil. We do have the 900 meters of rich gas condensate. That makes the CO2 manageable, although you might need a little bit more money for metallurgy.

Obviously, you're going to get an awful lot better flow with CO2 in an oil condensate column. So we feel comfortable. We continue to think of it as the largest discovery in 25 years. We've obviously secured a rig to go appraise it and test it, and we feel that we're increasing the quality of this with the results that we're seeing out of the lab moving forward. And we'll, of course, update you on gas oil ratios and volumes when we're ready with it, Lydia.

I think on AI, I do think we're making decent progress. A couple of quarters ago, I had Emeka talking to the sell side about what we're doing in AI. And all of you know that we've partnered with Palantir more than a decade ago inside the upstream to really get going on structuring our data and experimenting first with linear programming and then moving into AI more recently as that technology has emerged.

I think the first thing to say is we feel well progressed on the data foundations, which is critical to making AI work. We've said that we'll have a unified data platform, not just across the upstream, but across the downstream, across trading, across finance, where working with Palantir and Databricks, we'll have an entire unified data structure sometime around the middle of next year that then allows us to use AI and the LLMs against all the data we have. That's quite exciting that we'll be in that position. It's all cloud-based, so accessible everywhere. And I think that will make us distinctive for having that type of data structure on topology.

The actual examples of AI that we've got going around the company, I feel good about as well. Last quarter, I talked to you about kit detection, where the teams have worked with the LLMs to be able to predict kits ahead of meeting them while drilling in wells like far south in the Gulf of America, and we're at about 98% detection on kits. As well, you saw in these results, production is high. We've upgraded our production guidance for the year. Why? Because we're at nearly 97% availability in the upstream. That's the AI helping us predict faults before they occur, repair them before they occur along with all the investment in the hydrocarbon kit we've done. That 97% is a record across since merger time.

So outstanding result. And we're also seeing that inside the wells. Wells are failing at a far less frequency than they were as the AI helps us manage pressure depletion inside our well stock. Another great example is well planning. The AI is enabling us to knock down well planning by 90% as it catalogs all the data, provide suggestions to the experts, and that's significantly increasing the speed with which we can plan wells. not only safely, but more efficiently. And then it's not just contained to the upstream. We're working very hard with Palantir and Databricks to work our way through refining in a few of our refineries. And in the customers business, there's an interesting example of an AI agent that's helping us in our service stations in Germany.

We've trialed it with 20 service stations in Germany. It's been designed to help us manage our stock levels there to make sure that food isn't wasted, that we follow customer preferences for what they like to purchase and what they don't like to purchase.

And that after 3 months in those 20 locations, they've knocked down waste by 45%. So we can see tremendous examples of improved uptime, improved performance, better capital efficiency through AI. And we're very excited about the opportunity this has as our data foundations get firmly in place. Thanks for the question, Lydia.

We're going to move to the U.S. to take the next question from Doug Leggate at Wolfe.

Murray, I guess I've got a couple of parts to this related to your production guidance long term. You're already over 2.3. BPX is knocking it out of the park, frankly, versus its more than 600 end-of-decade kind of guidance. And now you've got multiple discoveries and potentially an early production system from Bumerangue.

So my question is, how do you see the risk to your production guidance? And maybe a kind of part B to that, would Bumerangue early production system be included in the CapEx guidance that you've given us over the current plan as well?

Yes. Thanks, Doug. I'll hesitate to give a ton of guidance forward. We've set out our plans to 2027 as principal guidance, and then we gave an indicator of volumes at the end of the decade as well. I think it's probably premature until we work our way through more of the portfolio review to understand where we'll be headed.

We do have choices on short-term versus long-term. So of course, we can pivot more capital into BPX and drive-up production near term or we can pivot more to things like the Paleogene and Brazil to drive longer-term resource production. I think if I step back from it, I think the thing I'd say is that I feel we now have the potential to grow long-term organic oil volumes for long duration.

And I'm not sure I've been able to say that over the past 25 years with BP that we've been in a resource position like that. It's a nice problem to have. And what we're tightly, tightly focused on is staying within our capital frame and deciding what the right thing is to do to grow shareholder returns and value on behalf of the shareholders.

So I think where I'd wrap that question is I'm very pleased to have been able to improve the guidance for 2025 after only 3 quarters, tremendous performance from the teams, as I said earlier. We'll update you on 2026 in February with what our viewpoint is of production then. And I would say we have more potential to grow, especially in oil now. And I feel we're in a better place than we've been in my career with BP, which is a nice thing to have. I hope that helps.

We'll take the next question from Lucas Herrmann at BNP.

A couple of -- well, a couple, if I might. Just going back or staying with BPX, Murray. Just trying to understand the CapEx profile. I mean, I appreciate the growth is very good. But the rig count kind of held. And I guess my understanding was always that as you came to complete on the processing facilities, bingo, so on and so forth, that we see a step down in spend, which doesn't really seem as though it's happening.

So some explanation as to the developments there. And then if I can, just a simple one for Kate on the pension fund, if that's ever simple. Can you just talk around the buy-in that you've arranged with Legal & General and why you -- why sort of stopped where it has at this point? Should we be expecting you to sell down or to allow Legal & General to buy in a greater proportion of the U.K. fund into the future?

Thanks, Lucas. I'll let Kate talk, and then I'll come back on BPX.

Yes. Lucas, thanks for the question. So yes, I mean, it's been a conversation inside the Pension Trustee Board for a while in terms of derisking. You can see a number of other companies have stepped into this in similar ways, some to a bigger degree than we have. I think the transaction that's been executed is a good one to date.

But of course, it's not our decision as a sponsor as a company. It rests fully with the Pension Trustee Board. And I think they will continue to evaluate how they feel with regard to further derisking as we go through the coming months. But I have nothing further to be able to say in terms of guidance on that at the moment, Lucas.

Great. Thanks, Kate. On BPX, Lucas, the way that we think about BPX is about $2.5 billion a year into it. Of course, we have the opportunity to flex that up and down. So this year, we'll spend around $2.5 billion in BPX. And as guidance, I think we guided around $2.5 billion through the next couple of years as well as we talked about the shape out to over 650 kbd in 2030.

I think a few things I'd say about BPX. The productivity improvement we've seen from the team is very high. They've had 30% productivity improvement in completions and 15% in drilling over the past 12 months. They're now at top quartile in each of the basins we operate from a drilling days per 10,000 and they're at top quartile on NPV per dollar spent, which are fantastic metrics to continue to push and congratulations to the team on doing that.

Another little advertisement for them would be they've drilled the best well in the Haynesville now ever, a 4-mile lateral completed and now producing 80 million standard cubic feet a day, which is a record for the Haynesville. So congrats to the team for doing that. As far as where do we go from here with BPX, we see continuous drilling inside the oil windows.

You'll notice quite a large liquid growth 2Q on 2Q, '24 -- that's as we fill up the Permian, and we're doing an awful lot in the Eagle Ford as well. There's strong growth in the Eagle Ford from the infill spacing, the downspacing I've talked about before and from the refracs I've talked about before. So very strong liquids growth across that business.

And the natural gas, the drilling and natural gas, we're running 8 rigs across. We'll have a conversation as we head into 2026 about do we keep running at 8 rigs? Do we move it up to 9 rigs inside the gas window? But the productivity improvements are so strong that they've actually drilled 13 wells basically for free this year relative to what our plans were.

So I think count on 2.5 until we give you additional guidance. Obviously, more drilling than infrastructure as we finished off the infrastructure -- the major infrastructure program, as you mentioned. And we see the chance for a strong growth moving in BPX moving forward, and we're happy to support the U.S. in growing production. Thanks, Lucas.

We're going to take the next question from Chris Kuplent at Bank of America.

Trying to stick to the one-question rule, but a wider one. beyond Castrol, Murray, could you maybe let us know where you're at on Gelsenkirchen, on Lightsource? And if I may just ask, you've done the TANAP stake disposal now in BPX. How many of those midstream opportunities do you still see when you look across your portfolio for potentially more noncontrolling interest stakes?

Yes. Great, Chris. Thanks very much. We laid out a program of $20 billion. Pleased to report that we've announced $5 billion now. I think $1.7 billion of proceeds in the door case and obviously, another $3.5 billion to come in the door to help the balance sheet as we complete these transactions as we get to completion and approval. I think what I would say is there's a strong interest in Castrol, and we continue to move forward with that. We'll update you. Same for Gelsenkirchen, strong interest, and we'll update you.

And on Lightsource, we started strategic conversations with counterparts, and we're at an earlier stage on that than we are on both Gelsenkirchen and Castrol. So you should expect something that takes a bit longer to disclose on Lightsource. But we're making strong progress on all 3 of those things. And we'll update you as the commercial processes, I don't want to say much more than that. We'll update you when we have news to tell you. I think on the infrastructure stuff, Kate, why don't you take that, please?

Yes, Chris. So as we look out in terms of the delivery of the rest of the $20 billion program, we don't see any other significant infrastructure deals in the pipeline. So in terms of how you should think about NCI, the way I would suggest you hold it is it's not going to increase beyond this. And actually, next year, as we redeem the hybrid that we prefinanced, there's about $1.4 billion left of the 2026 maturity that we prefinanced, if you remember, then that will start to bring NCI down.

And then should we choose to take advantage of the 25% of the hybrid stack that we could taper under the S&P rules, should we choose to step into that space, then you'd see NCI reduce further. So the way I would suggest you hold it is it's where it is and from here, it will go down.

We're going to go back to the U.S. taking the next question from Ryan Todd at Piper Sandler.

Bumerangue is rightfully getting the bulk of the attention right now, but you've had quite a bit of success across the drill bit across the portfolio. Can you talk about what are some of the other discoveries or opportunities this year that have been particularly exciting and maybe in particular, in Namibia, what you've seen so far, how it's comparing to expectations and the timeline of next steps?

Yes. Thanks, Ryan. Let's see. I think maybe -- so we're -- I think we're 12 out of 14 right now, if my math is right, on discoveries. So congrats to the explorers for such a great year. It's probably the best year in our history. Particularly interesting has been the convergence of seismic technology with big -- with new chips from companies like NVIDIA and the emergence of AI. It's allowing us in places like Egypt, Trinidad, Brazil to see below salt much better than we ever have.

And I can remember looking at the seismic on Egypt where you could actually see the channels. So there's -- we're seeing a change in technology that has helped exploration this year. I don't want to say it will necessarily do that next year as well, but that's been part of the story of the excellent exploration we've had.

I think Trinidad offers up 2 good discoveries for development. Egypt offers up 2 good discoveries for development. Brazil, we've talked about. And if I then move to Namibia, again, we're very excited. That's been done through Azule, our joint venture with Eni. We've had effectively 3 discoveries. The third one, Volans, came this -- in the third quarter. We've got a nice reservoir in Capricornus is the second one, 38 meters, a very high Darcy rock, good oil properties. And then we have Volans discovery, 28 meters if memory serves, rich gas condensate, only 14 kilometers away from Capricornus.

So Namibia is looking like a very good block. We continue to test the samples in the lab through the operator of the exploration phase Rhino, and we're quite optimistic about it. I think the Namibian Energy Minister called it the best block in the nation. So we're really pleased with that and looking forward to further appraisal and an update from the operator, Rhino, in due course about how we take the development of this block moving forward. But thanks for recognizing it. A very good year for exploration, and we're proud of the teams for what they've delivered. Thanks, Ryan.

We'll stay in the U.S. and take the next question from Paul Cheng at Scotia.

Murray, I want to go back into exploration. You guys definitely have a very good year. In addition to the -- maybe that combining AI and seismic to allow you to be able to see through the rock better. Is there any processes or the personnel changes that can lead to this great success? And how repeatable are they?

From that standpoint, going forward, if you do believe that you have better success rate, should you deploy more capital into the exploration going forward to be able to use it as maybe a larger source of replacing your resource going forward?

Thanks, Paul. I guess there are a few things happening, first of all, inside exploration. We have a great experienced team who have been high graded over time, and they've built on the track record of their predecessors and built up a very good base of knowledge around the world. So we have great people with great deep knowledge, I would say, of the basins in which we operate.

I think the second thing is technology is changing. The NVIDIA chips that we're now using inside our supercomputing are just incredibly fast and allow incredible iterations of theories. I'm kind of dumbing it down, all the geologists on the call, please forgive me for dumbing this down. But it enables much faster interpretation ideas, thinking about how one can think about the subsurface.

And that, of course, is converged with wide as seismic, full waveform inversion algorithms. So you've got this real thing of very good, experienced people with incredible horsepower in compute, much better than anything in history, along with dramatic technology steps from the service providers. And then I think the magic we have right now is the team is very engaged on the digital side and very engaged with using the technology and the AI to test new theories and see what else is there.

So that's a little bit about the magic. Is it repeatable? I'm never going to say that with exploration. My father was a geologist, and I know you curse yourself if you say that. So I don't think I'd necessarily bank on that. But we've certainly had a good year. We have some very good prospects next year. And as far as increasing capital in the space, the lesson for life from us is always quality through choice. Create as many opportunities you can, high grade down to the very best ones, and that gives you a higher chance of success than you otherwise would.

So that, to me, is what's so important is you keep quality through choice. I think we're spending around $600 million a year right now on exploration. I would not want to push that up despite the success because it forces quality. So thanks for the question. Congrats to the explorers for a great year, and we just need to remain capitally disciplined and make sure that we're pursuing only the very best opportunities. Thanks, Paul.

Thank you, Paul. We will go to Michele at Goldman Sachs next.

Congratulations again on the strong delivery this quarter. I wanted to come back to the CapEx budget. So you reiterated the guidance for this year, and you've got a relatively wide range for '26, '27 of 13% to 15%.

I was wondering, in an uncertain macro environment, if you were forced or decided to go to the low end of that range, where would you find the levers of flexibility to lower the budget effectively from the 14.5% of this year? I find it's an interesting time to start to think about some of those moving parts.

Kate, why don't you take that one?

Yes, I will. Thank you. Michele, yes, so we have got a decent range around the frame for the next couple of years. So that gives us plenty of space to maneuver, I think, in different price environments. As you look at this year, we've guided to around 14.5%. If you take out of that the final bullet on our BP Bioenergy and organic, then you're actually sub 14% on an organic basis.

If prices were to dip, we've got plenty of opportunity to take ourselves down to the bottom of that frame. And we'll continue to be very careful as we deploy every dollar if prices are strong and we choose that we actually want to drift up towards the top of that frame. I don't see any need for us to let go of the tight discipline that Murray and I have put around capital.

I think it forces the right conversations in terms of the value and returns focuses that we're pushing into every investment decision that we are now stepping through. And you can -- you've heard us talk about this on previous calls that, that discipline and that approach to our capital investment is so critical to us. As we seek to drive improvement in the operating cash flow going forward and making sure that we're choosing the very, very best of the opportunities at our disposal.

We've got probably one of the richest sources of opportunities to consider that we've had for a very long time right now, which is a great position to be in. And I'm very comfortable with the range and the flexibility that we've got, and we've talked before where we would go if we needed to take ourselves down to the bottom of that range, and there's plenty of opportunities around some of the onshore drilling, which we could choose to slow down. There's a little bit around the exploration playing at the edges, depending on how much of our rigs are committed over the next 12 months. But we have space and we have flexibility within that 13 to 15.

We're going to take the next question from Henry Tarr at Berenberg.

I wanted to ask about Iraq. Can you give us any more details on the sort of economics for BP of the contract in Kirkuk? And then obviously, others have entered into the country and there's a sort of large program planned. How material from a macro perspective, do you think the overall impact could be for production growth in Iraq if we look out sort of 3 to 5 years?

Thanks, Henry. I have to be careful on economics. The nation has not yet published the production sharing agreement. And until they do that, it's very difficult for me to say anything under the restrictions that we have. What I will say is progress since I last talked to you. We've done the initial production test and agreed that with the nation. That's 328 kbd of black oil is being produced. And the teams on the ground now, 45 people on the ground in Kirkuk, starting to work on well work jobs, acid jobs, compressor rewheels, getting procurement contracts in place, et cetera. And we look forward to helping the nation ramp up that field over time.

I think the stuff that I can say on the terms are -- they're obviously better than the first-round terms. We're on round 8, and each round has been incremental is my understanding across time based on what's been published publicly. And we do have price upside in this one. We do have the ability to take price on gas as well, which has not happened in previous rounds. We have exploration rights on the acreage as well, both surrounding and deeper.

So it's a much better enhanced contract than we saw in the Phase 1 terms of Rumaila, kind of, gosh, how many years on is that now, almost 20 years on. So that's probably all I can say about the commercial terms of Kirkuk, but we're very happy with it. And in due course, when we're allowed, we'll happily share the details. with the marketplace.

I think on the overall capacity for Iraq, there is a lot of oil there. And obviously, we've seen a few other deals being signed recently. And I guess my response is it's what the world needs. We continue to see oil demand moving forward strongly. We see strong demand for that oil. We perceive that some of the non-OPEC Plus is pretty much tapped out after February, March, April next year, and then we see flat to declining production outside of OPEC Plus.

So it's going to be dependent on places like Iraq to help fill the demand that's coming forward. So I think the world is going to need it, but it wouldn't be right for me to talk into Iraq's production capacity. That's something that the nation will have to talk about as opposed to myself. Hope that helps, Henry.

We're going to take the next question from Kim Fustier at HSBC.

I wanted to ask about the Venture Global case. You've won the LNG arbitration case unlike one of your peers. Why do you think your case was successful? And when do you think you might receive the $1 billion of damages that you've asked for?

Yes, Kim, I'm obviously not going to comment on any other cases. I'm not familiar with them, and it would be inappropriate for me to comment on that. As far as our case goes, we're very pleased with the result. Congratulations to our lawyers and our traders for having achieved this.

The next phase on damages is being organized with the arbitration panel. A date has not yet been set. I'm sure there will be an update when that occurs. And as far as the damages themselves, that's not a number that is our number. That's -- we don't recognize that number. So all I'd say is we're pleased. We look forward to the next stage. We'll update you when we're aware of when that's happening. And I'm very pleased with the result from the arbitration. Congrats to the team.

We're going to go to Josh Stone at UBS, please.

A question for Kate on the balance sheet. I'm curious as to how much attention you're paying to your gearing ratio on either a net debt to capital or equity basis because the reason I ask is as you get more of these cash proceeds in from asset sales, you will -- you're effectively selling parts of BP, your asset base will be coming lower and that's also before the impact of impairments.

So maybe just talk about how you're thinking about these ratios because I appreciate you've got like an absolute net debt target, but I think the gearing ratio is also relevant here. So maybe some comments on that would be helpful.

Yes. Josh, thank you for the question. Let me step through how we think about our balance sheet because I think if you just bear with me, and I'll take you through my thinking because I think it's quite important context. So financial resilience is really important to us as an organization as we move forward. It allows us to execute on the opportunities that we have as they present themselves.

And it's comprised of a number of things. And the first thing that everyone can measure us against is net debt, and we've now put a target against a material reduction in net debt by the end of 2027, and we've put a $14 billion to $18 billion, which we will deliver. If you think about where we stand today at '26, that would be a $10 billion reduction in terms of the net debt stack.

But of course, I think if you remember some of the slides that I used to talk about balance sheet and financial resilience at the Capital Markets Day in February, I was trying to be pretty transparent that we understand our total liabilities and the drain on our operating cash flow, those type of commitments is not just around debt.

If I think about some of the other big components, we have over $1 billion a year going out on Deepwater Horizon. So another 2 of those will go before the end of 2027. So that's $2.2 billion. We've got a level of prefinancing of the '26 hybrid I referred to earlier, that's $1.4 billion. So even if we do nothing else, where we stand right now, our liability stack will reduce over the next 2 and a bit years by $13 billion to $14 billion. And that's how we think about it as opposed to contemplating gearing.

We haven't got a gearing target. We've got a target on net debt. That's the first priority. That's what we will deliver. But I hope you can hear from my language that we think about the totality of our liabilities, and we're cognizant on the total cost of all of those.

We'll take the next question from Jeff in TPH, please, back over in the U.S.

We were hoping to also ask about the structural cost improvements, which look to be progressing quite well, especially based on the supplement disclosure, the roughly $400 million improvement quarter-on-quarter there.

But I'll actually gear my loan question here to follow up on BPX, if you could dig into basin-specific plans a bit more and maybe give us a sense for how you plan to pace activity adds in the Haynesville specifically over the next 12 to 18 months or so and maybe how the Eagle Ford may play a role, if at all, as part of that.

Yes. Great. Thanks, Jeff. Thanks for the kind words on cost progress. I'm sure Kate would like to update somebody if they want to ask a question on that one. As far as BPX, our plans in the Permian as we built out the infrastructure, we, of course, want to keep that full now that we've built that out. So 2 to 3 rigs to continue to keep that full for time. In the Eagle Ford, we continue to be very excited with the downspacing inside the oil window of the Blackhawk and the refrac programs.

The downspacing wells are doing better than the motherbore than the original wells simply because fracking technology has moved on so much from when they were drilled a decade ago. And the refracs, similarly, we're seeing much higher production on refracs than we did in the original wells from a decade ago that Petrohawk would have drilled.

So those are places that we'll continue to push and push the liquids side over time. And then on the gassier window, of course, we've got the associated gas from the Permian. But equally, we have a fantastic Hawkville gas, which is in the Eagle Ford, and we have fantastic Haynesville positions as well, the core of the core.

On the Haynesville itself, we'll follow the infrastructure is the way to think about it. As I said earlier, the teams have been doing a fantastic job on driving capital efficiency inside that basin, setting record after record on production capacity from the wells now up to 80 million a day on this latest 4-mile horizontal. And what we -- through our trading and marketing organization, we've been busy establishing offtake points. So we'll just gradually continue to grow the Haynesville in line with the infrastructure build-out, really infield gathering rather than any main export issues.

And we'll be contemplating 2 versus 3 rigs as we head into 2020 -- into the fourth quarter -- into the end of the fourth quarter and into 2026, and we'll update you from there. But tremendous resource, tremendous performance by the team and good gas prices, obviously, as well that we hedge out, and we look forward to growing that part of the business. I hope that helps.

We're going to go to Alice at Morgan Stanley. Alice, I know you're deputizing for Martijn, who's also here in Abu Dhabi. Over to you, Alice.

I have a question about downstream. So you printed a pretty strong results sequentially, but also with a number of moving parts. So of course, there was the successful delivery of the cost reductions, but also supportive macro for refining and then on the other hand, weak trading. So could you please give some insight into the contribution of each of those elements? And then on balance, what could we expect the run rate to look like?

Kate, over to you.

Yes. Thank you. Alice, let me try and break out the components of the improvement in the downstream. I would say it's been a 9-month period of really good performance across pretty much all of the business, actually in terms of the way that we've seen the organic improvement coming through, firstly, on the customer side, a number of things.

We've seen improvements, I would say, in almost every area of the customer side, whether it's aviation, Castrol is up 21%, I think now year-on-year for the 9 months. We've got stronger performance coming through the tight integration that we've got between fuels and midstream. That's something we've been working really hard on that's coming through. And we've got really good cost reductions.

So structural cost reductions delivered for the 9 months so far inside customers is about $0.5 billion. And then the other component of the improvement in the downstream operating cash flow from customers is around the BP Bioenergy. So as you recall, we consolidated that now. So you're seeing an improvement in terms of the consolidated earnings versus just [indiscernible] about $300 million. And then if I look at the product side of it, the refining portfolio is delivering superbly now. We've got refining availability year-to-date at 96.4%. That compares to the 96% that we set ourselves as a target back in February. That's a result of conscious investment and systematic improvement in the maintenance and integrity of our kit.

And as a consequence, it's running well. And as the refining margin improves, as it has done in the last quarter, we're able to capture the maximum of that. I would also say that refining have done pretty well on their business improvement program as well in terms of reducing their costs. They've reduced their cost by about $200 million further 9 months.

And then finally, perhaps on trading. Trading had a weaker quarter this quarter, but they had a very strong quarter in 2Q compared to others. We were very pleased with that. But as I look at the 9 months year-to-date, trading is pretty much in line with where it was last year. So very comfortable with where trading is. So that's quite a long answer. Hopefully, that's broken it down to enough detail for you to be able to follow the various component parts, Alice.

We're going to take the next question from Peter Low at Rothschild Redburn.

Maybe one just on the Gulf of America. Now that you've taken FID on the Tiber-Guadalupe project, does that open the door to a potential farm down of your Paleogene positions? Or what's your current thinking on the optimum time to do that kind of within the development of those assets?

Yes. Thanks, Peter. Yes, very, very happy to have taken sanction on Tiber. It's obviously the second sanction inside the Paleogene, Kaskida a year ago and now Tiber, 280 kbd boats. We own them 100% with tremendous resource recovery potential sanctioned and potential moving forward.

And I was really pleased with the projects team. They were able to knock $3 a barrel off the development cost on Tiber by effectively photocopying what we've done on Kaskida. So build -- design one, build many. So that's all very good. We are in conversations with counterparts about the potential farm down in the Paleogene, and we'll do this for value.

That's all that we have in our minds is how do we do this for value. And we want to make sure that it's accretive and that it's in the shareholders' interest to do that. But we continue the conversations -- and like all other divestments, we'll update you when we have something to tell you. Thanks for the question, Peter.

Thanks, Peter. We'll turn to Mark Wilson at Jefferies.

I will bring it back to Bumerangue. Again, still got a lot of data you mentioned and that appraisal will take a flow test. The release a few days ago spoke to an early production system. It sounds to me like a flow test there would have to be for a prolonged period of time to test multiple areas of a large column and fully understand the CO2 mix. That also sounds quite costly within a $600 million exploration budget if that includes appraisal.

So first, I'd like to ask if I'm visualizing that work scope correct for, say, 2027 in terms of what flow testing is needed? And would you appraise that at 100%? Or would we expect overall exploration cost to go higher to accommodate the Bumerangue appraisal?

Yes. Great question. It's a pretty good reservoir. So we think the flow test, where we're drilling the second appraisal well will give us a pretty strong indication of what the rest of the reservoir will perform like. We, of course, could be surprised as we go through that. But given the strength of the seismic, what we're seeing on the logs, we think that is the case. As far as -- so we'll do that somewhere around 4Q '26, early 2027. And we do have a team working in early production scheme.

Of course, it will depend on how the flow test goes. The flow test is really focused on productivity of the wells, to be honest, and how many wells we're going to need to drill. That's the primary focus that we'll have on that as we've done all the sampling in the sidewall core already from the initial appraisal well. So it's mainly about how many wells we need to produce the reservoir over time.

As far as timing of partnership, that's something in time, we will bring in a partner for sure. You probably don't want to do it until you're through the appraisal well and the flow test because that will have an awful lot more information that's derisked. But that's, of course, a decision that we'll think about with the Board as we move forward.

And the exploration, I'm not quoting an exploration number, including appraisal at this stage. We're somewhere around $500 million or $600 million on exploration. We're drilling about 15 wells a year right now, and we'll update you as we work our way through this as we enter '26 and '27. But we will stay inside that $13 billion to $15 billion capital frame that Kate talked about. That's very important. So I hope that helps, Mark.

We're going to go to Bertrand at Kepler next, please.

Yes. Coming back on the Venture Global arbitration. Murray, you've just mentioned that the $1 billion plus in damages that were in the press was not your numbers. Can you elaborate a bit? Or are you seeking a higher number?

Bertrand, thank you for the question. Look, this is -- you're quoting a number that was in a press release from Venture Global. We have not disclosed anything to the public markets around our viewpoint on this. And as it's a commercial process, I cannot disclose anything because it could impact the arbitration process, and I'm not going to do that. So I'm afraid I'm just going to have to say that, that was their number, not ours.

And in due course, we'll file our claims with the arbitration panel. And when the arbitration panel decides, they could make their views public. But I have to be very careful in the process, and I can't talk about anything commercially. Sorry, Bertrand.

We're going to move to the U.S. again, Jason Gabelman at TD Cowen.

I wanted to ask just on the equity affiliate portion, given you have quite a few of them at this point. And as you think about what the overall net contribution of those affiliates to your cash flow is, I'm wondering if that's changed at all given the JERA Nex BP joint venture and Beacon Wind within that joint venture being canceled and perhaps less cash infusions into that joint venture, but conversely, the success at Azule with the Namibia explorations resulting in perhaps less cash distributions from that entity in the near term? And just how that kind of rolls up into your overall views on distributions moving forward.

Yes. So shall I -- I'll take that, if you like. In terms of JERA Nex, the way to think about that is it's about creating for us in the future optionality, but in a very, very capital-light way. So JERA Nex will make their own decisions in terms of the projects that they execute and the sort of hurdles that they're testing against.

But from our perspective, it will be very capital-light and capital that we -- if we were required to put capital, it's going to have to compete with the other calls on capital in our portfolio, which is a pretty high hurdle. In terms of Azule, a very different type of joint venture. It's been a very good quality joint venture for us so far. I think we've got about $7 billion of distributions from it year-to-date -- sorry, in total since inception.

It's now self-funded. It's got a PXF and it's also issued its first bonds externally. So in terms of its being able to finance itself going forward and its growth, that's how we think about it right now. It has the ability to do more with regard to external financing. So we're not expecting it to be a drain on our capital.

Of course, to the extent that it is recycling its own cash flow to invest in opportunities like Namibia, then you would see a slight reduction in terms of the dividends that we receive from that organization, but it's too early to be able to scale that for you.

Yes. And if I just added a few things on Azule, we don't often talk about it, but it's had tremendous success, Jason. Agogo came online earlier this year, 8 months ahead of schedule. So congratulations to the team for doing that.

MGC is the next major project that's going to come online shortly. And they, of course, have the exploration discovery near the LNG plant of TCF and a couple of hundred million barrels of associated condensate. So in Angola, it's doing fantastic. I was down there recently to celebrate the Agogo start-up and Gordon was offshore on it. So just a tremendous joint venture with Eni that's doing very, very well for us, and we're very pleased to have expanded that into Namibia and the success we're seeing in Namibia. So I hope that helps, Jason.

I think we are probably at the final question given time. We're going to take that from Maurizio Carulli at Quilter Cheviot.

Well done for the positive results. Can I have a bit more color on the 20% increase in Castrol earnings and what has driven it? And also, if I may squeeze in an additional question. Is it possible to have more detail on your recent strategic investment in the electronic cooling solutions?

So maybe you want me to take that one. Yes. So this is a consequence of very deliberate progress that Michelle has been executing now for -- I think this is the ninth quarter where we've seen quarter-on-quarter progress. They have a strategy of onward upward forward, and it's deliberately seeking to make their organization as cost-competitive as it can be and grow volumes, which they've managed to do systematically over the last couple of years in almost every part of the business.

The other part of the improved delivery in Castrol, of course, is a consequence of the fluctuations that we've seen in base oil and additives and they hit a high post-COVID, those have tapered off a little bit. So that's also coming through, which is helping. But it's about very deliberately growing volumes, driving costs down to improve their overall operating cash flow delivery inside the organization. So that's doing really well. Do you want to talk about the liquid?

Yes. The liquid cooling for data centers is an interesting opportunity. They've signed a couple of deals with counterparts. It's commercially sensitive, so I can't name the names, and they're in trial on that with a few companies. It's a long-term growth potential for the business. that looks quite interesting. It's quite a competitive space, and we -- we're hopeful that, that starts to develop and at a faster pace moving forward. But thanks very much for the question, Maurizio. Nice to hear your voice.

We are going to finish promptly on the hour. Irene, Chris, I know you are still pulling. Maybe please follow up with the IR team in London. Happy to do so. A big thanks on behalf of Murray, Kate, myself, thank you for listening. Thank you for the continued interest in BP's results today, and we'll stop the call there. Thank you again.

Welcome, everyone. I'm Spencer Dale, BP's Chief Economist. And thank you all for sparing the time to join us today for the launch of this year's Energy Outlook, both here in BP's headquarters in St. James, London, and virtually around the world where, at last count, we have really quite several thousand people joining online. So you're all very welcome. And again, thank you for sparing your time. We don't take your time for granted. We will try and make this session as informative and as interesting and as fun as possible. So thank you all very much.

Also at this point, let me also just give a shout out to the rest of the team that helped produce this year's outlook. Many of them are in the room with you today. Much of the outlook was put together over the summer, most normal people either at the beach, sitting under a tree with their feet up. So thank you, the team for all your time and effort, especially over the summer. Much appreciated.

The energy system sits at the heart of modern day society. It's critical for the everyday needs of people and businesses around the globe, adapting to changing political, technological and environmental priorities. That central role is a very reason why many of us choose to work in or around the energy industry. It's also why the challenges and forces shaping the global energy system are forever changing.

And the past year has been no different. Geopolitical tensions, which came to the fore with a war in Ukraine escalated further with the conflicts in the Middle East and increasing use of sanctions and tariffs refocusing attention on energy security. The seemingly exponential growth in data centers to support the increasing use of AI, gains in energy efficiency growing at subpar pace, boosting energy demand and carbon emissions continuing to rise with the risk that it becomes harder and more costly for the world to remain within a given carbon budget. So lots of issues for this year's energy outlook to get its teeth into.

And this outlook is based around 2 main scenarios shown here, current trajectory in green and Below 2 degrees in blue. The scenarios are framed around different assumptions about the speed and nature of the energy transition, the single biggest uncertainty facing the energy industry.

Current trajectory, as the name suggests, tries to capture the broad pathway along which the global energy system is traveling. It places weight on climate and energy policies already in place. It places weight on government aims and pledges for future decarbonization, but it also places weight on the fact or the difficulty of actually meeting those aims and pledges. So there's a great judgment in here.

As you can see on the whiteboard here, carbon emissions in current trajectory sort of stabilize through this decade, and then they gradually decline during the 2030s and '40s. But the pace of that decarbonization is slow and shallow, so by 2050, carbon emissions are only around 25% lower than they are today.

In contrast, Below 2 degrees, explores how different elements of the energy system might change in a pathway in which the world achieves a faster and deeper reduction in carbon emissions. Carbon emissions in Below 2, shown in blue here fall by around 90% by 2050. Below 2 assumes a significant tightening in climate policies, it also embodies shifts in societal behavior and preferences, which further support gains in energy efficiency and the adoption of low carbon energy.

In the outlook, we show Below 2 is broadly consistent with limiting the increase in global average temperatures to well Below 2 degrees. Now at the risk of sounding like a complete stack record, let me repeat the warning I always make at this point. The energy system won't exactly follow either of the past described by the scenarios. The scenarios are not predictions. We can't predict the future. We know we can't predict the future.

Now I can imagine some of you are sitting there thinking, well, hold on, so Spencer's just told us both of these scenarios are going to be wrong. And neither of them consider those other issues he mentioned at the beginning, increasing geopolitical fragmentation, weak energy efficiency, the risk of delayed transitions, so what am I doing here? Am I wasting my time? Don't worry. I feel your pain and no, you're not wasting your time.

Today's presentation will address both of those concerns. Although there's only a tiny chance of the energy system turning out exactly in line with either of the scenarios, we can still use the scenario to develop key insights about how the energy system might develop. In particular, we can identify different aspects of the energy system, which are common across both scenarios.

And so the idea here, the way to think about this, if I can see qualitative trends in the energy system, which are apparent in a pathway which similar to one we're on now, remember that slow, shallow decarbonization pathway. And that same trend is also apparent in that rapid decarbonization pathway shown by Below 2, it may give us extra confidence that those same trends were also being pathways between those 2 cases.

In contrast, if other elements of the energy system are very different in Below 2 relative to current trajectory, it suggests they're more dependent on the speed of transition. And so the first part of today's presentation will identify some of those key common trends and some of the key differentiated trends.

But what about those other issues affecting the energy system over and above the speed of transition. In this year's outlook, we've developed a series of sensitivity analyses to consider those other issues. And in the second part of the presentation, we'll take you through 2 of those sensitivities considering the possible implications of increased geopolitical fragmentation and also the potential implications of weaker energy efficiency.

At that point, you're pleased to know that we have stopped bombarding you with charts and more charts and more data, and we're going to stop and we'll switch to the Q&A session for the final 40 minutes or so, which is always, I think, the most fun and interesting bit. For those of you online, please feel free to submit your questions at any point during the presentation. You can also vote for the questions which you think are most interesting and put them to the top of the list. I'm afraid, guys for you in the room, you'll have to show a little bit more restraint, no shouting out and you have to wait until the Q&A.

Also for those joining online, we'll invite you to take part in the real-time poll on some of the issues raised by this year's outlook and with feedback the answers from that poll before the end of the presentation. So we have an action-packed session ahead of us. So please don't go anywhere.

If you watch it online and thinking, is this the right time to go and get a cup of tea? No, it's not. You have to stay with us, otherwise, you're going to miss something really exciting. So please stay with us.

You may have noticed from the opening slide that we're going to do something different today. We're going to have a 2-handed presentation. So I'm super excited that Gareth Ramsay is going to take you through the next part of the presentation, and then I'm going to come back to outline the results of the sensitivity analysis.

I've worked with Gareth, I think, for the best part now about 20 years in a variety of different economic and energy roles. For the past few years, Gareth has been leading the production of the energy outlook. And as some of you may know, Gareth will be taking over from me as BP's Chief Economist from the beginning of next year where I know he will do an awesome job. So Gareth, why don't you come up, and I'll hand over the Chief Economist pen?

Thank you. Thank you so much, Spencer. And as he says, don't worry everyone. That is not the last you're going to see in Spencer today. But as he said, I've been leading production of this energy outlook. And so first, I'm going to talk you through some of the key elements of the outlook. What happens to the crucial sort of moving parts of the energy system in our scenarios. And then Spencer is going to come back to do his even more fun bit at the end and to look at a couple of fundamental ways that things might be different to these 2 scenarios. But before that, what do we want you to know about what's in them?

So as Spencer said, I'm first going to highlight key features, which are there in both our 2 scenarios, things that might, therefore, be likely to occur across a range of other pathways as well, perhaps those in between the 2 scenarios as well. And the first of those common trends is around oil. So this chart shows the path for oil demand in our 2 scenarios. Now you will see, they are not the same. The profiles do indeed differ in terms of how long demand carries on rising for and then how much it declines.

Now in the current trajectory scenario, that's the pathway that the world is on at the moment, oil demand keeps on rising over the rest of this decade before it then starts to gently fall back. But by 2035, it's only fallen back to around its current level. It then gradually falls over the second half of the outlook to a little above -- to around 85 million barrels a day by 2050. Whereas as you can see in Below 2, the falls in demand start a bit sooner and then they happen with much greater intensity.

So the oil consumption is still -- is -- it falls all the way to around 35 million barrels a day by 2050. But the common trend that I want to pull out here is that both scenarios imply that oil carries on playing a central role in the energy system for at least the next 10 to 15 years. And that matters a lot for the investment that we're going to need.

As the international energy agency pointed out last week because of the way the output of oil fields naturally declines, we're going to need hundreds of billions of dollars of new investment every year to meet these kind of levels world wide. But there is a second common element in the 2 all demand profiles that I want to pull out as well. And that's a change in where this oil is going in our economies.

Now this one might seem a bit more technical, but it is really important. So this chart shows the growth in oil demand sort of average growth per year, both in the past, that's the bar on the left, and then in the future, the bars on the right in our 2 different scenarios. And it shows where that oil is going, marked in the different colors.

Now for a very long time, including since 2010, as you can see on the chart here, the single biggest driver of oil demand growth in the global energy system has been rising demand for oil in road transportation, in our cars and in our trucks. But we're now at an inflection point in these scenarios. You can see that all of those blue bars are negative in the future. That's the use of oil in road transportation falling in both our scenarios.

Now in some ways, that might seem surprising. We know that in emerging economies, in particular, as people get richer, their demand for mobility, including for road transportation rises. But that's more than offset at a global level by 2 things happening. First, importantly, the average vehicle on the road becoming more fuel-efficient over time; and second, of course, an increasing shift towards EVs.

Instead, the biggest single driver of oil demand growth in the future is not oil being combusted. It's all being used as a feedstock in what we call the petrochemical sector, particularly for the production of plastics as well as other oil-based materials, and that's the red bars on this chart. And this use of oil pushes up on demand throughout the whole outlook period in our current trajectory scenario. And even in the first half of the outlook in Below 2 as well. So oil for this kind of use as a feedstock, it's only around 15% of total oil demand out. That rises to over 30% in 2050 in current trajectory and to more than 50% in Below 2. That's more than half of oil being used to make things not for energy.

But although we know this is going to be important in the future, the precise scale of it is still pretty uncertain. I won't get into the maths here, but we show in the outlook that different, but equally plausible assumptions about how much plastics we're going to want in the future can lead to really big differences in feedstock demand of as much as 10 million barrels a day oil equivalent, most of -- the large majority of which will be oil by 2050. So this is seemingly quite niche question. basically of how this feedstock demand is going to evolve in the future is actually going to have a really big bearing on the prospects for oil demand in the future.

Now the next feature of the energy system that you can see in both scenarios is that the world continues to electrify. Over the past 10 years, our demand for electricity has grown twice as fast as our demand for energy overall. And that trend just continues over the outlook with the world's demand for power doubling or more than doubling by 2050.

Now the vast majority of this electricity demand growth is in emerging economies, driven again by rising prosperity. It means that the share of energy that the world consumes taking the form of electricity rises from only a bit more than 1/5 now to around just below 30% in current trajectory and to -- sorry, to 30% here about 1/3 and to more than 50% in Below 2 as more than half of the world's energy use electrified by the end of the outlook period.

Now most of this higher power demand is for growing demand where we already use a lot of our electricity, that's in industry and in our buildings. But of course, that's being supplemented by newer uses of electricity, including, of course, those electric vehicles, but also higher data center demand to enable rising use of artificial intelligence.

That higher data center demand on its own makes up around 1/10 of the extra demand for electricity over the next decade or so, so important, but far from everything. But of course, data centers have a much bigger impact than that in some places globally, especially in the U.S. where it accounts for about 40% of electricity demand growth over the next decade.

Now of course, AI makes its way into every conversation you have anywhere. And of course, data centers are being discussed an awful lot at the moment. In this year's outlook, we have a special section, which is talking about how AI might affect the global energy system, how it might impact the system. And I'm not going to talk you through all of that today. Instead, I just want to give you one takeaway from that discussion. And that is that the impact of AI on energy is unlikely to hinge on how much data -- how much power data centers need.

Now none of us know how much AI is going to improve our productivity, and so how much it's going to improve economic growth. But plausible estimate of that impact could imply increases in energy demand 20x greater than the growth in data center power demand. But AI won't just affect energy demand, it could have equally big implications for the supply of various types of energy and the efficiency of many parts of our energy system. So just the bottom line here, if we're going to think about AI and energy, we do need to think much wider than just data centers.

Now this increasing electrification of our energy system takes us to another feature of the energy system, which is common across both our 2 scenarios, which is that the growth in power generation is, in essence, a story about wind and solar power. So wind and solar generation, the orange bars here, account for all of the increase in power generation globally in both our 2 scenarios. In the case of Below 2, more than all of it.

And that means that wind and solar are going to become a central foundation of our energy systems in these 2 scenarios. So added together, they generated about 15% of our electricity last year. By 2050, they account for more than half of global power generation in current trajectory and more than 70% of it in Below 2.

Now we often talk about wind and solar together, as I have here, but as has been the case recently, solar grows faster than wind in both our 2 scenarios. It's costs go down faster, it's quicker to deploy and also it gets greater policy support as well.

Of course, this increasingly central role for wind and solar power does bring with it new challenges. As we mentioned in the report, changes are going to be needed to our power systems to make them more resilient and reliable and capable of balancing demand and supply as generation comes more and more from these weather dependent variable sources.

I want to think about power generation from a slightly different angle now so just help us think about the energy transition in a slightly bigger picture way. In last year's outlook, we introduced a distinction between 2 different phases of the energy transition.

First, the energy addition phase. Now in this, low carbon energy is growing rapidly, but it's not growing fast enough to meet the overall growth in energy demand. So use of unabated fossil fuels is growing as well. And then the energy substitution phase, that's in which low carbon energy is growing fast enough to more than meet the increases in overall energy demand, so the unabated fossil fuels decline.

Now one point we made in last year's outlook was that in previous energy transitions, the world has stayed in this energy addition phase. It's not consumed less of the old energy sources. And this alteration has been used by others to highlight just how challenging it's going to be to actually reduce carbon emissions.

But although it's true that the world as a whole is still in this edition phase, we show in this year's outlook that the switch from energy addition to energy substitution has already happened in a lot of places, including the EU and the United States. We calculate that around 1/3 of the world's primary energy today is being consumed in regions which have moved from the energy addition phase to the substitution phase, and that increases to around 60% of energy by 2030 in current trajectory, that's helped in part by China moving into this substitution phase. And we can see the same trend for power generation.

So this chart shows the share of global electricity generation, which is in the power sector equivalent of energy substitution. So that's the share of the world's generation where low carbon power generation is rising fast enough to more than meet the increases in overall power demand. So the generation from unabated fossil fuels is going down even if power demand overall is rising.

Already, as you can see, around 1/3 of electricity used today is now in countries in this power sector substitution phase. In current trajectory, this increases to around 60% by 2035 and over 70% by 2050. And this is in current trajectory, remember. This is the pathway along which the world is currently traveling. Of course, the increase in Below 2 is even quicker than this.

So those are the key common trends I want to highlight across the 2 scenarios, trends that we think might also happen in pathways that perhaps in between those 2 scenarios as well. First, oil demand played a major role fueling the global economy for at least the next 10 to 15 years. But with that demand increasingly supported by oil for making things, not moving things as its consumption in road transport gradually wanes. And second, the continuing electrification of our energy systems with a huge growth in power demand met by more solar and wind power.

So I want to switch now to those trends which differ materially across the 2 scenarios, suggesting these ones are much more sensitive to how fast the energy transition turns out to be over the coming decades. And the first example is the outlook for natural gas shown in this next chart. Now natural gas demand is actually pretty strong in both scenarios over the next decade. But as you can see on the chart, it then takes 2 quite different parts. And that's because of 2 different forces that are pulling gas demand in different directions in the 2 scenarios.

In current trajectory, so that's the pathway the world is currently on, natural gas demand keeps on rising basically over the entire outlook or at least until the mid-2040s. So that by the end of the period, it's around 20% above its current level. And that's mostly driven by rising demand in emerging economies as they grow and they industrialize.

So gas demand up by around 1/5 by 2050. But in stark contrast to that in Below 2, natural gas demand starts to decline in the early 2030s. And by 2050, it's down around half from its current level. And dominant force in that scenario is just the push for greater decarbonization. So with gas losing even more share to wind and solar power in -- wind and solar in power generation and being displaced directly by the faster electrification of buildings and industry.

Now in practice, both of these forces are likely to be at work in the future. So the outlook for natural gas is going to depend on the relative strength of these 2 forces.

The other feature finally of the energy system that I wanted to highlight as being particularly dependent on the speed of transition is the outlook for low-carbon energy technologies and low-carbon energy vectors which are newer, less mature, more expensive. So the charts here focus on just 2 of those. On the left, demand for low-carbon hydrogen, on the right, carbon capture use and storage.

But I should say the same big picture that I'm about to tell you about these 2 charts hold for others of the newer, higher cost, low carbon energies and vectors like sustainable aviation fuel, ammonia and methanol in shipping, in direct capture of emissions from the air.

And the story is that in current trajectory, the growth of both low-carbon hydrogen and carbon capture use and storage is pretty limited. Low-carbon hydrogen reaches around 75 million tonnes per year in 2050 in current trajectory. How do you think about that number? Well, that's less than the current demand for hydrogen, which we get almost entirely from unabated fossil fuels, so-called gray hydrogen.

Likewise, CCUS, carbon capture use and storage, reaches only around 700 million tonnes of CO2 in current trajectory by 2050 or 700 million tonnes. Well, that means only around 2% of energy sector emissions are being captured in 2050. But the growth of low-carbon hydrogen and of carbon capture use and storage is much stronger in Below 2. Low-carbon hydrogen gets to around 350 million tonnes per year by 2050, not just replacing gray hydrogen, but also being used, for example, in transport and in industry.

CCUS reaches around 6 gigatonnes of CO2 by 2050 in Below 2. And the reason for these sharply different profiles in our 2 scenarios is pretty straightforward. These types of technologies are just expensive relative to their current alternatives, whether that's coal and natural gas unabated in the case of hydrogen production or whether it's the fossil fuels that hydrogen might be competing with, or whether it's just simply not capturing emissions in the case of CCUS.

So these types of technologies increased materially in pathways in which we, society, are willing to bear the additional costs of reducing these harder to abate carbon emissions. Even then, much of the growth in these technologies, you can see, is concentrated in the second half of the outlook, really after 2035 as carbon policies tighten enough and also as cost decline.

So those 2 key features of the energy system, which are particularly dependent on how fast the transition goes. First, with the natural gas demand rises or falls over the next 25 years. And second, the pace and the extent to which these less mature, higher-cost low carbon energies and technologies like low-carbon hydrogen and CCUS develop. At which point, as promised, we're going to go back to Spencer. He's going to step back from the detail and do a bit even more fun. So Spencer, let me hand you back, the pen for now.

Thank you. I'm certainly not sure if I want to give up that pen actually. Thank you, Gareth. So as Gareth said, in this final section, I want to shine a light on those other issues affecting the energy system over and above the speed of the energy transition. And I want to focus on 2: increased geopolitical fragmentation, and the possible implications of weaker energy efficiency.

And as I said, we do this by conducting some so-called sensitivity analysis of the main scenarios. So this type of analysis has the benefit that most elements of the scenarios are assumed to be unchanged, allowing the key features of each issue to be isolated and explored. But it has a drawback that in reality, other elements of the energy system wouldn't be completely unchanged if these issues were to materialize. As such, the results of the sensitivity analysis that should be viewed as sort of illustrative rather than providing a complete characterization or a detailed quantification.

So with that caveat in mind, I want to start by considering the possible implications of a significant increase in geopolitical fragmentation. The motivation for this is, I think, unfortunately, pretty clear. There's been a significant escalation in geopolitical conflicts and tensions in recent years, including the wars in Ukraine and the Middle East, and the greater use of trade sanctions and tariffs.

Further escalation could be to increasing geopolitical fragmentation. Such an increase could impact many different aspects of our economic and political world. The focus here is on how it may affect the global energy system. And in particular, I want to focus on the possible implications of increasing fragmentation causing countries to reduce their exposure to international trade and becoming more self-reliant. So that's the focus here.

And what's sort of interesting is there's been quite a lot of discussion about this type of issue over the last year or so. Quite a few people, different people have been writing about it. But what's interesting is you read those different commentaries, they often come to different conclusions. And I think, in part, it's because different people have focused on different aspects of how this may work.

So one of the things we wanted to do today or in the outlook is to try to carefully map out the various different ways, the various different channels through which a shift towards greater self-reliance may impact global energy. So let me take you through where our thinking got to.

So most directly, a shift to greater self-reliance might dampen the growth on international trade as countries move their supply chains back home or restrict them to countries or regions most politically stable or aligned with them. That weaker international trade will tend to dampen economic growth as a scope for increased specialization and competition is limited. And that weaker GDP growth, weaker economic growth, will then tend to feed through into lower energy demand. So that's one of the channels we want to think about.

Increased geopolitical fragmentation may also heighten the importance of energy security as countries seek to reduce their dependency on imported energy and energy technologies. Concerns -- heightened concerns on energy security may trigger 3 types of reaction. First, an increased preference for domestically produced energy relative to imported energy. If I'm worried about my energy security, I don't want to keep on importing my energy from abroad all the time.

There's a similar desire that you also may want to reduce your dependency on imports on energy technologies, including low-carbon technologies, with a corresponding emphasis on developing domestic or at least diversified supply chains even if they come at a greater cost. And third, you may place an increasing weight on energy efficiency as this reduces the need for all types of energy and so bolsters energy security.

Increased geopolitical fragmentation might also lead some countries to place less weight on climate and sustainability goals. In part, this simply reflects the nature of the so-called energy trilemma. If countries place greater weight on energy security, it necessarily implies they must place less weight on the other 2 elements of the trilemma, either energy affordability or energy sustainability.

Moreover, that slower economic growth we just talked about stemming from weak trade may also mean that countries have less resources to devote the deep to decarbonization, especially to those mature higher-cost, low-carbon technologies that Gareth was just talking to us about, low-carbon hydrogen, CCUS, sustainable aviation fuel.

So this is sort of where we got to over the summer when you were on the beach, trying to think about through all these different channels. And in the outlook, we explained how we go about calibrating these different channels. Don't worry, I'm not going to go into that today. Rather what I want to do is try and focus what the -- on the results, how does this impact the global energy system? And that's shown in this next chart here.

So this chart shows the impact of increased geopolitical fragmentation on the level of primary energy relative to current trajectory. And those color blocks show you how -- where the different energies have increased or decreased. So the first bar here shows you the impact of that lower GDP stemming from weaker net trade. So primary energy falls, you can see here, and it's then spread across these different fuels in terms of oil, gas, coal and renewables. The relative weight impact on those different energies depends on the weights of those fuels in the end uses. So how much importance of the role of oil in transport, the role of coal in industry and in buildings and how sensitive demand in those different end sectors are to movements in GDP.

The second bar shows the impact of increasing concerns about energy security. And the important point here is that concerns about energy security generate a mix of offsetting effects. So the increased preference for domestic rather than imported energy leads to a shift away from oil and natural good -- and natural gas, which are the most heavily traded fuels towards renewables and coal, which tend to be produced and consumed more domestically.

But the higher cost of renewable energy, energies as countries move away from international supply chains, together with the lower weight attached to climate goals, weighs against low-carbon energy and favors fossil fuels. And so this is what you end up with this result here. So what happens here is, as a result, at a global level, less oil as people move away from terms of importing oil, less renewable energy as people place less weight on climate goals and also the cost of renewables have gone up. More coal because for many countries, particularly in Asia, that's a source of domestic energy.

Gas is the interesting one. So gas, on its own, the increased preference for domestic energy would mean that gas would fall, that's a similar way to oil. But as you place less weight of renewable energy, and you're using less wind and solar, you need more gas to do your power sector -- to your power generation, which pushes it back and the net is, it sort of what evens out. So that's a way to think about what's going on here.

The third bottom bar shows the net impact of these 2 broad channels. Overall energy demand is lower and the carbon intensity of the fuel mix is slightly higher, reflecting that increased share of coal. Now I must confess I was a bit nonplus, when I first saw these results. We've gone to this trouble to model all these different channels. We've done all this different calibration, but the impact on the energy system is pretty limited.

Energy demand is a bit weaker, but the fuel mix isn't much changed. But as we dug into the results, we realized the limited impacts at a global level are not because increased geopolitical fragmentation doesn't have important implications for energy systems. It does. But rather because increased fragmentation impacts different countries in different ways, which, at a global level, tend to offset each other. And so it's more interesting to look at fragmentation, how fragmentation impacts individual countries. And that's what this chart does here where I've compared the impact on the U.S. on the left with China on the right.

And the reason for picking the U.S. and China is not just because they're the 2 most important countries in the energy system, but also because their economic and energy structures differ in several important ways. As you know, the U.S. is a net exporter of fossil fuels. And so a heightening in energy security doesn't need it to wanted to reduce its demand for oil or natural gas. But it does cause it to reduce its dependency on imports of low-carbon technologies.

Moreover, the U.S. economy is relatively less trade intensive and is therefore less exposed to that weaker net trade channel as I'll tell you about. China is close to the mirror image. Heightened energy security concerns caused it to reduce its dependency on imported oil and natural gas. But since it's a dominant producer of low-carbon technologies, its access to low-cost, low-carbon energy is largely unaffected.

China is also highly exposed to international trade and so is more affected by the impact of weaker net trade on economic growth. These differences in economic and energy structures lead to differences in the impact from increased fragmentation. So you can see for the U.S., the overall impact on primary energy relatively limited is a relatively less trade-intensive economy.

The impacts produced in oil, just reflecting the shear size, the importance of oil in the U.S. economy and also lower renewable energy as it shifts away from importing low-cost renewables. And again, natural gas sort of having those 2 cost-cutting impacts. At one level, the lower demand for energy just reduces natural gas, but it then gets crowded in because you have less renewables going on.

In contrast, in China, bigger impacts on the overall energy demand and more broadly based across all 4 sources of energy. The general point here is that an increase in geopolitical fragmentation would be likely to lead to more differentiated energy pathways, differentiated depending on each country's natural resources and the structures of their energy systems, accentuating some of the trends that are already in train today.

For energy importers, accelerating their transition to greater electrification, powered by domestic low-carbon energy as they seek to reduce their dependency on imported fossil fuels, perhaps fostering the emergence of new electro states. In contrast, fossil fuel producers may become more wary of increasing their dependency on imports of low-carbon technologies, preferring instead to concentrate on their comparative advantage in producing fossil fuels. Greater geopolitical fragmentation is likely to lead to greater energy differentiation.

The second issue I want to consider is a potential implications of a sustained period of weak improvement in energy efficiency. Now I realize that first blush, this may sound a bit dull and arcane, especially relative to all those interesting people I was just talking about geopolitical things and all that. Stay with me. The recent weakness in energy efficiency, and importantly, its persistence could have a major bearing on the outlook for energy demand over the next 10 years or so.

This chart shows the annual growth in energy efficiency over the past 15 years measured in terms of final energy consumption. For the first 10 years of this chart, from 2010 to 2019, energy efficiency has averaged around 2% a year. That's shown by that dotted line. So the way to think about this, each year, the world needed 2% less energy to be used for the same level of output. But over the past 5 years, energy efficiency has only averaged 1.5%. And you can see we've had some particularly weak outturns in both 2020 and also more recently in both 2023 and in 2024.

The causes of this recent weakness are not fully understood. A recent study by the IEA suggested it may reflect several factors: the increased importance of manufacturing intensive industries in driving the post-COVID economic recovery in some key emerging economies, also perhaps the increasing intensity of extreme weather events and the implications for energy. So think about the increasing need for air conditioning as heat ways get more and more intense.

Also, the IEA point to a slowing in investment in energy efficiency projects. But I think it's fair to say that the understanding of what caused the recent period of week efficiency gains is still quite patchy. As such, it's hard to know if and how quickly the pace of gains in energy efficiency is likely to revert back to something closer to their historical trend.

In current trajectory, the pace of efficiency gains -- that weakness in efficiency gains gradually dissipates. So it's by around 2030 or so the trends in current trajectory are back to their normal historical rate. But suppose the recent weakness is more persistent. Suppose, for example, the weakness in energy efficiency persists for 5 more years and only goes back to the current trajectory profile by 2035. If we hold constant, all the other aspects of the energy -- current trajectory, just this weaker profile for energy efficiency leads to a materially stronger outlook for energy demand, with total final energy consumption growing by around 20% by 2035 compared with 15% in current trajectory.

Total energy demand growing by over 90 exajoules in its alternative case relative to less than 70 exajoules out to 2035 in current trajectory. This stronger energy demand is important in its own right, but its impact on the fuel mix is even more pronounced. And sort of this is a key point here. The key point is that short-term cyclical fluctuations in energy demand are typically largely met by changes in fossil fuels and not by movements in renewables and nonfossil fuels.

So if you -- for those of you who like to think in statistics, the correlation between fluctuations in energy demand and fossil fuels is over 0.9. In contrast for nonfossil fuels, it's around 0.1. And if you think about it, this greater responsiveness of fossil fuels to demand fluctuations isn't surprising. The cost structure of renewable projects, high levels of upfront capital expenditure, low operating costs make them less responsive to cyclical fluctuations.

Moreover, there's greater scope to vary the production and storage levels of fossil fuels over relatively short periods. This greater responsiveness of fossil fuels to demand fluctuations means that even short-lived variations in energy efficiency can have significant implications for fossil fuel demand.

To illustrate this, in the sensitivity, we take limiting case, and we say that all the additional energy demand implied by the slower efficiency gains is met by fossil fuels, and we keep the growth of nonfossil fuels completely unchanged from current trajectory. Now that's obviously highly stylized assumption, but it captures the essence of those correlations I just talked to you about, and it highlights the potential significance that even a relatively short period of weak energy efficiency can have a big impact for fossil fuel demand.

In particular, in its alternative case, oil demand after 2035 grows by around 6 million barrels a day. That compares to almost no growth in current trajectory. So you remember that story that Gareth was telling you about, the current trajectory for oil demand broadly flat between 2023 and 2035, no growth in demand. 6 million barrels a day growth in oil demand just through that weaker profile for energy efficiency, everything else unchanged. Likewise, for gas demand growing by over 1,000 bcm in the alternative case compared to less than 700 in current trajectory.

The key takeaway here is that a weaker profile for energy efficiency, even for just 5 years relative to the counterfactual could lead to a significantly stronger outlook for oil and natural gas, indeed, coal as well, with a corresponding deterioration in the outlook for carbon emissions. Trends in energy efficiency may sound a bit dull and techy, but they really matter.

Let me conclude. The system -- the energy system is currently consuming more of all types of energy. In the language that Gareth used earlier, it remains in the energy addition phase of the energy transition. How quickly it moves to energy substitution with the growth of low-carbon energy displacing unabated fuels and the intensity of that substitution is the single biggest uncertainty facing our industry. The scenarios included in this year's energy outlook help explore that uncertainty.

As Gareth highlighted, this switch from energy addition to energy substitution has already happened in many individual countries, both for the power sector and for energy as a whole, but to do so at a global level would be historically unprecedented. That's the challenge.

It's possible to use the scenarios to identify some features of the energy system, which are likely to be more robust to a range of different transition pathways, the increasing electrification of the energy system, the rapid growth in wind and solar power, the central role that oil and natural gas will continue to play at least the next 10 or 15 years. But there are many uncertainties.

Some of those issues are at the top of our daily news feeds, such as the escalation in geopolitical tensions, where, as we argue, greater geopolitical fragmentation is likely to lead to greater energy differentiation. In contrast, others struggle to even make it to the inside pages of specialist trade journals. But as we show trends in energy efficiency, and indeed, petrochemical feedstocks really matter. The one thing I know for sure, fast forward a year from now, there will be plenty for the 2026 energy outlook to get its teeth into. Thank you very much.

Okay. So before we move to the Q&A, I want to briefly take you through the online poll. So for those of you watching online, 3 multiple choice questions will appear on your screens. With apologies for those in the room, we thought about phones and QR codes and thought this is going to be disaster. So apologies to those in the room. So for those online, I will talk you through each question and for those in the room, I'll talk you through each question. You will have a minute or 2 to answer that question, and then we'll move on to the next one. And we'll share the results of the poll at the end of the Q&A session. Easy. What could possibly go wrong, a real poll, thousands of people globally. Easy. No problem.

Okay. So question #1, what do you think will be the most important feature shaping the global energy system in the next 10 years? And we've given you 5 possible answers. 4 of those relate to the issues that we've discussed today: energy efficiency and its implications for energy demand; geopolitical fragmentation and the impact this may have on different countries' energy choices; the continuing electrification of energy systems; or the impact of AI. And we've also given you a fifth option, option E, which is something else. There's something else which we haven't talked about this morning -- this afternoon.

So the most important issue is shaping the global energy system in the next 10 years, 5 possible options: energy efficiency, geopolitical fragmentation, continuing electrification, the impact of AI or something else. Okay. So hopefully, those of you who haven't -- you've made your choice because you're about to lose your opportunity because we're going to go to question #2.

So question #2 is, what do you think the natural gas demand will be in 2050? Or where do you think natural gas demand will be in 2050 relative to today's level? And we've given you 5 choices ranging from a lot higher to a lot lower. And we thought this would be interesting because, as Gareth showed, the range of possible outcomes for natural gas is particularly wide. And so your choice may depend on your views of the resilience of natural gas demand in different parts of the world, or it may also be influenced by your view of the likely speed of the energy transition.

You can remember that Gareth told you, in current trajectory, with a slow shallow trajectory, the gas demand continued to rise pretty much all the way out to the mid-2040s. In contrast in that rapid decarbonization scenario, natural gas starting to decline from the sort of early 2030s onwards. So your view of the level of natural gas demand in 2050 relative to today's level, 5 options from a lot higher to a lot lower.

Okay. Hopefully, you've made your choice. Let me go to the third and final question. Following today's session, how have your views changed about the likely pace of the energy transition? And again, we've given you 5 options here, ranging from a lot faster than you previously thought to a lot slower. And if today's discussion haven't really changed your views at all, you can pick option C that it hasn't really changed my views.

So to be clear, this is not about your view of the likely absolute pace of the transition, but rather, was there anything in the discussion or anything that you've seen in the outlook that have caused you to alter your view. And so you can pick if it's faster, A and B, slower D and E, it really hasn't changed your view, a question, option C. So if I can encourage you to make your final choice, and then we'll come back to show you the results at the end of the session. And here, everybody in the room, you can see whether the results accord with your own thoughts as well.

Okay. The plan now is to move to the Q&A session, which is always the most fun bit, or the scary bit, depending on which seat you're sitting on. Gareth is going to come back to the front. And we're also going to be joined by Aisha Dhaliwal. Aisha works in our team and leads all our work on thinking about an analysis of energy in industry and Aisha has kindly agreed to help moderate the Q&A session. So Aisha, thank you, and over to you.

Thank you, Spencer. I have to say as someone who studied chemical engineering worked in power, then transport and now industry. I'd say energy efficiency is far from dull. It's very exciting. And as you showed in your chart, it's one single measure that can really move the needle when it comes to energy demand totals. So we're going to take questions both from inside the room and online. With the questions online, please up vote your favorite questions. The question we ask might not be exactly what you've asked in your books, but it will be a combination of the top voted questions that we've seen.

If you're in the room, please put your hand up to ask your question and introduce yourself, your name and where you work before you ask your question.

So if there are any questions in the room, we can start here.

I was really drawn into the point on energy efficiency, actually, if I may start there. I know Spencer, you said that, that drop is not well understood, and maybe, therefore, this is a bit of a loaded question. But what is informing your perspective on the path forward therefore? How do we think about energy efficiency? Is it because of end use? Is it -- what would drive a recovery back to that historical trend or potentially a path where we remain at sort of low improvement in efficiency?

So when we go about producing the outlook, we don't take a view on energy efficiency in a top-down way. We don't sort of draw a line in and then say, let's do it that way. What we do is we do it from a bottom-up perspective. So you would take a view on vehicles. And so in terms of road transport, we take a view about how quickly big efficiency is improving. And quickly and importantly, how quickly the vehicle stock is turning over. If people just hang on to their old cars. It doesn't matter when new cars are really efficient if nobody is buying them, how quickly people will move to energy -- to electric cars, which tend to be far more efficient. So that's the story for transport and so on and so forth and so on. And so that's why we built it up.

And then you sort of then look from a top-down perspective and you sort of draw comfort from the fact that it's going back to around its sort of trend level. So that's how we do build that up. I think one of the big uncertainties here is the ones that Gareth was talking about is how might AI affect everything here in terms of energy efficiency. So that's a significant one.

A sort of related question is, if we had a silver -- what are the things that we really worried about that energy efficiency, what should we be really focusing on? And some work, I think some really nice work. I'm not sure if they published it yet, but we'll do soon a group called the Energy Transitions Commission, I'm a part of that group, has done some really nice work on something called energy -- what they call energy productivity, which is sort of what we would call energy efficiency.

And they say, if you want to do the 2 most important things you can do to get improvements in energy efficiency, it is, first, electrify as many things you possibly can. Just electrification is just a far more efficient way of powering most goods. And secondly, is to improve the efficiency of electrical applications. And those 2 things, in terms of their calculations, are by far more important than, say, insulation of buildings and so on. All those other things matter, but those are the 2 things that the ETC highlight has been important.

Thank you very much. So our next question comes from online. And the question is to do with the transition, and actually goes nicely with the last question in the poll. So what do you think -- what's your view on the speed of the energy transition? And how do you think it's changed in recent years?

So I will grab this one. So how do we think, what's happened in the energy transition and what's happening in the last few years? If you look at the headline numbers, the ones that really matter, clearly, progress has been disappointing. Carbon emissions are still going up. Moreover, they're going up at quite significant levels. The -- in the statistical review, which is now produced by the Energy Institute, they calculate, I think that carbon emissions grew by about 1.8% in '23, another 1% in '24. So these are really significant levels.

And the sort of counterpart to that is the fossil fuels, oil, natural gas, coal are all -- have all been surprising us to the upside. So we've revised up our views of these different profiles. That's a counterpart to those things. The interesting question is sort of why and the cause, which I think is a more interesting bit. Because at the same time that we've been surprised by the growth of oil, natural gas and coal, we've also been surprised by low carbon energy. Wind and solar has surprised us to the upside.

The IEA estimate that this year, the well will estimate 2.2 -- will invest $2.2 trillion in low-carbon energy. That's up 70% in 5 years. Did anybody really think it's going to go quicker than 70% in 5 years? So at this point, you're scratching your head to go, "Well, hold on, if low-carbon energy is growing more quickly than I thought, how can fossil fuels be growing more quickly than I thought?"

But now you know why because energy efficiency has been surprised us on the downside. So the world just needed more energy. So despite low carbon energy growing more quickly than we expected, is still not feeding through to the other side. And if you -- just as a sort of back of the envelope calculation here, just the sort of way of thinking about this with all the caveats I gave. If I do a same sort of calculation as I did going forward for 5 years, over the past 5 years and say, let's suppose energy efficiency had averaged 2% over the last 5 years. And then I allocated across the fossil fuels in that way, so oil demand over the last 5 years, 2019 to 2024, has grown by about 2.5 million barrels a day. That's what we've observed.

Under that sort of counterfactual, oil demand would have grown by less than 1 million barrels a day. over 5 years. So a completely different sort of story. So the answer to the question is, have we been disappointed by the energy transition? Yes. Carbon emissions continue to rise. But when thinking about why, I think the key thing is, I think some of the common narratives I see don't really play enough attention on the why. And the why, I think the key thing is what's happened to energy efficiency, and that's why we sort of have labored, and I promise we're soft talking about energy efficiency now. That's why we've labored it so much today.

You have anything to add?

No.

I see a question in the back.

Martin Hague from Shell Scenarios. I very much like to enjoy your exposition about the fragmentation and how to assess that. I thought that was quite novel to try and break down the impact actually from GDP concerns and security concerns. I'm wondering how you did it. I can see how you do the GDP bit by looking at the responsiveness to GDP in the past, whether short or long-term recessions or long-term cycles. But with this fragment -- the security concern, did you look at past incidents did you try to validate it in a way?

Was it a sort of an expert judgment? And how much fragmentation, how much security concern did you -- because there could be some countries that really perceive a really existential threats immediately and it puts them on to a sort of a war footing that means also of historical parallels out of track. And your sort of numbers don't surprise me, but they don't look like that sort of extent of security concern, for example?

Can I get this one? You know that sometimes you get those things where somehow -- one of your teachers is asking you a question, you're really scared. So Martin works for the Shell Scenarios team, and we're all in all of the Shell Scenarios team. So I'm now feeling very worried about answering this question. So the truth answer, Martin, is, with a lot of judgment and a lot of humility, and I'll talk -- I won't bore everybody. We made different judgments on the different bits.

What we try to do was give enough to calibrate it in such a way that the effects would shine, would come out, but not in such a way that will be implausible. Because what we are trying to do here is not -- and I didn't -- I don't think I quoted any number during that -- those sessions. I just quoted sort of qualitative changes because I think then, in some sense, we don't sort of want to sort of stand and fall on the precise numbers.

What we want to do is highlight those sort of the different impacts. And that's -- so I wanted -- the calibration was done enough to try to sort of bring those effects out. So we could have that conversation. I haven't thought about natural gas being sort of caught up in that way. And it was only when we did the work. They saw it. And I also haven't really thought about how a global level, it all sort of wash out, but you saw it in the fast start. So it was done to do that rather than try to have any degree of precision. Is that fair?

Yes, that is fair. Yes. I was speaking from the nerdy side of it from helping the person who actually did a lot of the heavy lifting of business in the room, I tempt to drag it up here. But -- we -- I would say about, it wasn't just judgment, the way Spencer described it, although there's lots of that. We're also trying to use a sort of structure of the global energy system. So thinking about proxy in the best way we could these kind of channels for -- it's as if oil demand is in some ways more expensive -- sorry, oil is a bit more expensive for you if you're an importer of it than otherwise.

It's a bit -- it's as if the cost of electricity from renewables are going to rise a bit faster on average just because you're no longer going for the cheapest cost producer in the case of many countries because they want to diversify their supply chains or go internally for supply.

So we're sort of trying to think about what the different kind of correlations between different types of energy and the energy system and thinking about how they operate. But as Spencer said, putting a lot of judgment on. But we can compare that after the session.

You can tell from those answers, the relative close proximity to the people doing the work.

That's a great answer. I think a good conversation after this.

No one else, just like 2 of us.

So we've had many questions online regarding oil demand and the changes between last year's outlook and this year's outlook. So one of the big questions is, why have we revised up our oil demand projection compared to last year?

Do you want to take it?

Yes. So it is true. So someone online has been looking at last year's energy outlook and this year's energy outlook. We tend not to talk about changes year-by-year because we're trying to take a fresh look and sort of think about things bottom up. It is true, though, for those of you who want to go online or look at previous booklets. So we've revised up the pathway for oil demand in our current trajectory scenario, which we also had last year by about 6 million barrels a day by the end of the outlook period. So a sizable increase in our projection for demand by the end.

I think all of the reasons why I'm interesting is kind of 3, and I'll just mention them just talk about what's informed us over the past year. One of those are just the data. Some of the things that Spencer has been talking about. We have seen stronger oil demand than perhaps we expected in the near term, and we expect that to sort of persist for a bit. So some of it is just what we have seen. And I think that kind of comes back again. Spencer promised we wouldn't talk about energy efficiency anymore. I will just mention it. It's one of the things that's happened.

The second one is a sort of part of that in a way, I guess, which is every year, we have to -- when we do these numbers, and Martin does his and Shell, I'm sure, we're thinking about what's the sort of efficiency of the vehicle fleet in particular are going to be? And we've actually -- and we kind of try and model that bottom up. We've got a big model of the entire vehicle stock around the world. And we've actually revised down the projection for improvements in vehicle efficiency gain over the next 25 years compared with what we had last year.

That's not to say it's not still really important. As I said when I was talking, that's still a really important factor that actually pushes down on oil demand in road transportation, but a bit less than we had in last year. And that's because, in part, it's because it looks like vehicles are turning over less quickly than we had thought.

We've done some analysis looking at that. Again, persons in the room, I apologize if I get numbers wrong, but average age of vehicles has risen from 12 years to about 15 years over the last few years, quite big change actually. And so that has pushed down a bit on the speed with which we think those efficiency gains come in.

And then the third one is actually something else I mentioned, which is feedstock demand. We are forever thinking about this. I talked about it in the presentation. I think it's more important than many people realize. And we actually have pushed up on our estimate of feedstock demand in this projection relative to the one we did a year ago. And actually, the second part of that question which was there other ways in which all demand might keep rising over the '24?

To '24 and beyond.

I think it's worth coming back to that feedstock thing, which I mentioned, which is I think I promised you I wouldn't go into the maths. I will try and do this in a way that does not make you all stumped for the exit and switch off online. But this all comes down or a lot -- I've lost something. This all comes down to -- so as we get richer, basically, how much more stuff that is made from oil do we want? A large part of this, how much more plastics does the world use as economic growth happens?

And that relationship has been changing. What -- it's really interesting what's happened over the last few years. It's been getting less responsive the amount of plastics we buy relative to how much our economy grows. And so you need to think about, well, how is that relationship going to change in the future? And so one thing that could easily push up on oil demand is if it turns out that actually that relationship goes back to something more like its historical trend, that's where you get nearly 10 million barrels a day extra oil demand by 2050. it's a huge oil demand. So that's one thing that could push up.

Another one is we have to take a judgment on future mandates and policies around road transportation. And we -- as Spencer said, in our current trajectory pathway, we don't just look at policies currently in place, but also the direction in which they're traveling. And we assume in many places that those stick. And who knows, if mandates change, that could be another thing that could push up on all demand. I mean, as we said, current trajectory is our best attempt to model the pathway were currently on. It's not a forecast. And so there are many things which could push up on oil demand relative to that.

Got a question at the front here.

Paul Butler from CRU. You started off with some emission trajectories, current trajectory and 2 degrees. And I didn't know if that was a start point from your analysis or an output from your analysis. But I'm sort of assuming it's a start point. I mean you derive your -- it's an output. If it's an output then -- well, the same question applies. You've mentioned petrochemical has been really important. What's your basic question? What's your assumption about the carbon in petrochemicals?

Does it ultimately get emitted? Or is it never emitted? I could ask the same question about natural gas, I suppose. Is it just the direct emissions you're thinking about? Or is it the upstream emissions and everything else? Because that might -- that will affect, obviously, what the trajectory is?

Yes, So the answer, Paul, to the first question is, we use -- it sounds I'm going to go to fence straight away. The carbon accounting methodology we use is sort of similar to all of these frameworks and all of these frameworks is floored because essentially, it's used at the point where the energy is used. At the point where energy is used as a feedstock is not combusted, and therefore, there's no carbon emissions.

Implicitly, therefore, assuming that at some point at the end of that plastics life is sort of -- is stored in some sort of perfectly sealed landfill, which is clearly not right. So it doesn't take account of that.

We do take account, however, of -- I think which related to your other one, if we take -- we include estimates of methane emissions associated with the production, transportation and distribution of fossil fuels, and that is included in our measure of emissions, and so that bit is there.

And we also include process emissions from things like cement. Energy and the line. Again, and I've got a question online and then I've seen some more hands in the room, so don't worry, we'll get to you. Spencer, what surprised you most over the course of your time here at BP?

COVID, war in Ukraine, OPEC behavior. I think actually the thing which has surprised me most of all, I think, is just, I think, the pace of change in China is the thing which I have been most surprised about. China today accounts for about 60% of the world's purchases of EVs. It accounts for about 65% of new solar installations, about 65% of new wind installations, about 30% of new nuclear installations.

We're now talking about will carbon emissions in China peak this year or 1 year out or 2 years out? I just don't think that was a part of the conversation 11 years ago. So I think that's the biggest change. It's just the unbelievable pace of change that we see in China.

And I must have been one of the unbelievably lovely things about this job is you get to travel and meet people. And the importance that China has placed on changing the nature of their energy mix has been a consistent narrative the whole of the time I've been going over that 10 or 11 years. So I think that is the single biggest surprise, I think, for me over this period.

I think many can agree. And a question from the room.

There's a question right at the back. I can see.

Yes. Curious to how the investment in the grid, your views on that play into the outlook. Clearly, a lot of renewables today is delayed because of congestion and grid. Battery technology is coming, but it's not quite there yet. So just curious as to what you assumed about grid infrastructure in the energy outlook?

Do you want me to take that one?

Yes.

Yes. So we recognize -- I talked about this electrification and that enormous growth in power demand, 100% or 130% Below 2. So we recognize that grids -- I think I mentioned it as an aside that there are significant challenges associated with essentially meeting this growth in power demand. And I think we recognize that, that is going to be among the headwinds in current trajectory in particular, that it's going to be something that is restraining the pace of power demand over the next decade at least.

But fundamentally, I think we assume that there is going to need to be a significant increase in good investment over the coming years. Now we don't model every bit of that bottom up in every country. I think some ways are sort of helpful to look at others in BNEF and the Internet -- sorry, Bloomberg New Energy Foundation and the IEA have done some good work on this, which kind of talks about something up to sort of a doubling in grid investment relative to the kind of $300 billion, $400 billion a year that we've been seeing recently.

We have seen an increase, but I think implicit in our current trajectory pathway is a significant further increase, whether that's a doubling or something like that from the good investment we've seen over the last few years, and therefore, by implication, stronger than that in Below 2 higher than that. I think, yes, that's the way I think about it is, it's a headwind, and it's a challenge, but it's one that we think can assume is met in order to meet the pathways in there.

Sticking with the Power theme, we've had a question online regarding nuclear. So do you have any comments on the role of nuclear and the trends in nuclear and in the energy system?

Sure. So yes, I sort of almost felt apologetic that we didn't say a word about nuclear energy in the presentation. I know that people are always really interested in it. It's just I would have made you sit there for even longer if we'd also talked about nuclear energy. Obviously, we do model nuclear and it's in there. We talk about it actually. There's a couple of pages in the outlook, which talk about our assumptions and what we have in the 2 trajectories.

So to summarize it. Basically, nuclear power has actually been falling as a share of generation over the past few years. And we do see something of a turnaround in our current trajectory pathway for nuclear power. So essentially hold steady as a share of generation over the pathway in current trajectory. Now that means it has to go up quite a lot because power generation is going up quite a lot. It doesn't do more than that though. So it stays at around sort of 8%, 9% of total generation over the outlook.

I would just say, I suppose the only other thing I'd mention on that is a lot of that is China, again, from Spencer's last answer. So that is responsible for quite a lot of the increase in nuclear generation. It's a lot harder in developed economies given time lines, permitting processes, you all know about.

Also the fact that I don't think costs are completely transparent in China sometimes, but they are managing to develop nuclear more quickly and more cheaply than in western economy. So more than half of the increase in nuclear over the future is just taking place in China and quite a chunk in India as well, actually.

That's brilliant. We got two questions at the back.

I'm Elena Pravettoni from the Energy Transitions Commission. Thank you so much for the presentation and also for the reference to our work. The question I had was about the rate of energy substitution in the countries where that's already happening. I wanted to ask how much do you see data center demand slowing down that rate, if at all?

Can I take that?

Yes.

So it's useful to come back to that. So some of you, they're more eagle-eyed. In fact, I'll bet if you want anything like me, there'll be someone at least in audience who is thinking of asking the question of power sector substitution does actually sort of dip a bit in the chart I showed before it then goes up again. And part of that is the increasingly strong power demand growth we are seeing and some countries are sort of hovering a bit between substitution and addition in the power sector, in particular, less so actually for the energy system as a whole.

I suppose I'd come back to what I said, I think, in the presentation on the way, which is, data center demand matters a lot for a few places. It matters a lot for the U.S. And a chunk of that, we talk a little bit about it in the outlook, is going to be met by higher gas generation than I think would otherwise be the case. It's 40%, as I said, I think, of high U.S. power demand. And as you know, I know that's happening in a place that has not really experienced rising power demand for quite a long time.

So they've been operating in a world where they haven't had to cope with that, and they are now having to cope with increasing power demand. And I think, for them, something which is adding 40% of the increase in power demand you're facing, that is clearly affecting the energy mix, and they're having to devote more natural gas to that amongst other things.

So it does make the margin a difference in some places. I suppose I would just come back to the point, though, that we do see that substitution rate that the share of the world that moves into that power substitution picking up pretty substantially over the coming 10, 15 years, even with the additional boost in data centers. And while no one knows, I would say, we are -- our forecast is just relatively robust to how much we think data centers, that projection in current trajectory is relatively robust or how much we think data centers are going to do is material.

I've got another bit just to add from online to that question. Can wind and solar handle the demand required to power the infrastructure for AI? And if I may, just say a couple of words on that. I think that there is a chance for wind and solar to have a great impact and be very useful when it comes to data centers, empowering them, especially when coupled with batteries. And we've seen stories of small-scale data centers where they've been coupled with reused and recycled batteries with PV. That mean that they can run 24/7 on renewable generation. How well that will be replicated across the world will be interesting to see, but there's definitely use cases where renewables will definitely be powering data centers, but we might see gas turbines used to supplement that.

I guess just to round it up, we've got profiles for power demand going into data centers built into these trajectories. Those profiles are pretty much in the pack compared to everybody else's. And the big picture point that Gareth said was, all of the growth in power demand is met or more than met by wind and solar. So it will vary across different countries in different regions. But big picture, we think all of the growth in power demand, including that needed for data centers over the long run, over this period can be met by wind and solar in both of those scenarios. And remember, we can't predict the future, but if you see the same quality of trend in those 2 very different ones, it may start to give you more confidence that it may be also apparent in somewhere in between as well.

Really sorry, can I just jump in because I'm regretting not saying one thing, which is on that -- come back to the question. It's funny, isn't it? Because I have warned you in the presentation, we shouldn't just think about data centers to AI and then I just -- we just talked about data centers to AI. And I sort of mentioned in passing that AI may well be really important for how we operate our energy systems. And the power system is one of those places, in particular, where AI could really make quite a difference.

We have to keep reminding ourselves, this AI is going to be used for something. Some of it may be making videos, but it will also be used commercially. If it really is going to grow at these kind of paces for -- I see some shaking of the head. But it may well be used for some commercially useful applications.

And one of those may well be enabling us to operate grids much more efficiently, able to absorb lots and lots more smaller assets on the grid, balance demand and supply much better. So it may turn out, I can perfectly well imagine in 10 years' time, well, when we think about the implications of AI for our power systems, we may well not be talking nearly so much about data centers because we'll be operating them much more efficiently.

Very true. Very true, Gareth. Are there any other questions in the room?

My name is [indiscernible]. I'm the Head of the Commercial section of the Bulgarian Embassy, but I have a background in project development and project management and I dealt a lot with cogeneration. Do you factor this in into your analysis because this is an ongoing interest from investors? Or it's too minor to be making impact right now of all the big numbers?

Also, data centers, there is technology that uses the heat produced by the computers into cogenerating them into heating for houses or factories or all these approaches and new technologies, how do they impact the big numbers?

So yes, we do try to take account of cogeneration in different parts, and there's a sort of buried within our details of some of our analysis. So perhaps I don't think it's simple to describe it, but we do try to take account of that of cogeneration as part of that as we're building up our sort of picture of the energy system. So yes, often doesn't make the headlines because it doesn't have a huge impact on the energy system, but we try to do it to the extent we can. Absolutely.

Our final question. Does our analysis suggest that there's a climate change threshold that forces the world to move from CT to a more rapid transformation?

So the simple answer is no, we don't try to predict when things will happen. Remember, we're not in the game of predicting. We're in the game of sort of looking at different scenarios. We do, do the third sensitivity analysis, which I didn't talk about today is one similar to what we included in last year's energy outlook, which will be called a delayed and disorderly scenario.

And this is just recognizing that the pathway we're on at the moment, that slow shallow pathway is gradually, each year, using up carbon budgets. And so if, for example, the world wanted to stay within a 2-degree carbon budget, we show that if you stay on that pathway, you entirely exhaust that carbon budget by 2040.

It's actually a little bit worse than that because if you stay in that pathway and you've exhausted the carbon budget in 2040, you still got carbon emissions at 30 or 35 gigatonnes. And so to actually get down to something close to Net Zero, we sort of -- we do some analysis and it's in the book. We sort of suggest that you need to move away from the current pathway on to something which is faster, more rapid decarbonization pathway similar to Below 2 by the early 2030s.

And if you haven't moved off that carbon budget pathway -- that pathway onto something quicker by the early 2030s, your ability to stay within a 2-degree carbon budget without sort of undertaking a costly or disruptive transition becomes harder and harder. So I think the answer is, we don't know we don't try and predict when this will happen.

But what we do talk about is sort of recognizing that often when you talk about 2050, it's a bit like my children. My children are in their early 20s. And I say, "Guys, pensions. And they all look at me and go, "Dad, I'm wrong, I'm not going to do that now. I'll do it later. That's what I'm a little bit worried about when you have these conversations about carbon. And when I say 2050, yes, absolutely get to it soon.

And it's not 2050 or 2030 saying, if you're still on this pathway in 5 years' time, your ability to stay within 2 degrees is getting harder and harder. That's why this matters.

Thank you. Is that the last question. We're going back to the poll, right. Okay. So okay, the poll. We had about 1,300 people applied to the poll. So the first question was, if you mind you, what do you think will be the most important feature shaping the global energy system in the next 10 years?

And the answer shown here, wow, this is really interesting. You never know what people are going to say. They do, and it's -- so here, pretty much half the people look like they're saying the geopolitical fragmentation, they think is going to be one of the -- sort of the most significant factors shaping the energy system. I had no idea what people were going to say. That -- and then pretty evenly spread then across the other 3: energy efficiency, electrification and AI. AI coming forth. I'm quite pleased about that. I'm also quite pleased about only 3% said something else, which suggests that we haven't completely wasted everybody's time for an hour and half. So that was the answer for number one.

Number two, where do you think natural gas demand will be in 10 years -- in 2050 relative to today? Quite evenly spread here, actually between -- but I mean, high 30%, is that -- so I've got my numbers here. So about 33%, about 1/3 of people thinking it will be a bit lower.

A bit higher.

A bit higher. Okay. The numbers I've got in front of me are wrong here. So here, the biggest number here is a bit higher. So suggesting are pointing to a world of a relatively slow energy transition with some people thinking a bit lower. So that story here, a bit higher, sort of pacing greater weight, if you like, on the current trajectory.

And the third question. Following today's session, how have you changed your -- how has it changed your view? And people -- the majority of the biggest vote, I think it will be a bit slower than I thought before. I'm not sure if that's a good thing or a bad thing. Perhaps I'm looking at the energy efficiency and worrying about it. So 30 people haven't really changed my view, but the biggest one, 40% thinking that it will be perhaps a bit slower than they thought before.

All right. Sort of a bit of fun. I also think it's quite interesting as well those results. So let me stop and thank everybody again. And for those of you watching online, I'm reliably informed a pop-up box will pop up on your screens now with a very short survey just sort of saying, what bits did you find interesting today? What bits would you like to change? Please fill that in, lots of food for thought for Gareth for next year. Far more importantly, all of this information is now available on bp.com.

We've only touched a fraction of the type of analysis that's in this year's energy outlook. So please go online and start exploring. If you have views of the things you disagree with, just let us know. This is a whole part of a continuing dialogue. The same here for people in the room, please go on bp.com. If those of you who quite like still the hard copies of the book, the hard copies of the book will be available outside.

With that, there's teas and coffees outside for people in London. Thank you very much, and thank you all for your time. Thank you.