BP 2015 Annual Report Download - page 10

We are prepared and well
positioned to respond to the
volatile environment as
we move through 2016.
Carl-Henric Svanberg
Chairman’s letter
Dear fellow shareholder,
2015 has been another challenging year: oil prices have remained low, falling by more
than 50% and our industry finds itself in a position not seen for some 30 years. This
sustained low price is a result, not of lack of demand, but of oversupply. However, our
work in reconfiguring BP following the incident in the Gulf of Mexico has meant that we
were prepared and well positioned to respond to this volatile environment as we move
through 2016.
Shareholders and distributions
We have maintained our dividend during the year and remain committed to growing
sustainable free cash flow and shareholder distributions over the long term. I believe that
our current financial framework can support these commitments.
The board considers shareholder distributions in the context of how to achieve long-term
growth and value creation. In the current weaker price environment, our aim is to
rebalance our sources and uses of cash to ensure we cover capital expenditure and
shareholder distributions with operating cash flow.a This will enable BP to continue to
develop its business while maintaining safe and reliable operations. We anticipate that all
the actions we are taking will capture more deflation and drive the point of rebalance to
below $60 per barrel. The board will keep all of this under review and will make any
adjustments to our financial framework as circumstances require.
Strategy
The proposed consent decree with the United States federal government and settlements
with the US Gulf states are an important step. It has enabled us to look at the future with
greater confidence. However the current price environment continues to be a cause for
concern and so we have set a financial path for the next two years. This medium-term
strategy is based on optimizing our deployment and allocation of capital and the continuing
simplification of our business while maintaining our commitment to safety and reliability.
Our financial results over the year demonstrated the benefit from the integration of our
upstream and downstream activities. We have a strong, refocused and rebalanced portfolio
based on our distinctive capabilities which we believe will enable us to withstand lower
prices. In the future, we will continue to invest in a balanced range of resources and
geographies across the Upstream and Downstream to enable us to achieve long-term
growth.
We have recently published our BP Energy Outlook. I believe this makes an important
contribution to the discourse and debate in this area. As the world continues to develop
economically then oil, and increasingly gas, will be needed for the foreseeable future. This
is the core of our business. Overall we keep under review the broader strategic direction of
the group as the market for our products evolves and the energy landscape starts to
change.
2015 has seen increased focus on climate change. BP has consistently argued for a price
on carbon and recognized the part we all must play in being part of the solution. However
governments must take the lead in developing policies to reduce carbon emissions and we
continue to engage in this debate. The UN conference on climate change has produced
$7.3bn
dividends to BP shareholders
7.5%
ordinary shareholders annual dividend yield
7.7%
ADS shareholders annual dividend yield
BP Annual Report and Form 20-F 20156