BP 2014 Annual Report Download - page 10

In the present environment,
returns to shareholders remain
a key priority.
Carl-Henric Svanberg
Chairman’s letter
Dear fellow shareholder,
We started 2014 with confidence in the overall development of the world and a feeling of
progress in most of the world’s economies after several challenging years. However, the
year ended with significant uncertainties. BP operates in a geopolitical environment that
has become more turbulent and the price of oil has significantly declined, returning to a
pattern of volatility not seen for several years. The industry must adapt rapidly. Even before
the recent volatility, we have taken measures to streamline and reshape BP. We believe
we are well positioned to meet the challenges of the coming years.
In 2011, we set out our 10-point plan with clear goals that we have delivered over the last
three years. This is a significant achievement for Bob Dudley and his team. It marks a
major step in refocusing the company after the tragic events of 2010 when 11 people lost
their lives in the Deepwater Horizon accident – something we must never forget. Our
strategic progress has to be tempered by the finding of gross negligence in the Clean
Water Act litigation in the US, which we strongly disagree with and are appealing.
Strategy
Completing the 10-point plan does not mean that our work is done. Far from it. The board
continues to be deeply involved in discussing and shaping our strategy – with its clear
priorities, quality portfolio and distinctive capabilities.
We successfully sold assets at a time of higher oil prices and are now going through a
rapid cost adjustment to address this new landscape and improve our underlying business
performance. We are refocusing our approach to producing hydrocarbons in the US Lower
48 and we are resetting our operations across the entire business. This is all taking place
without compromising on safety. Our recent strategic partnership with Chevron in the Gulf
of Mexico demonstrates what we mean by value over volume through a new ownership
and operating model. Our goals are to make investment choices that play to our strengths,
increase sustainable free cash flow and grow our distributions to shareholders.
We began a number of these initiatives earlier in 2014, putting us ahead of the current oil
price pressures. These strategic actions will continue and more will be necessary as we
respond to short-term imperatives. We aim to ensure that BP builds on its distinctive
strengths in 2015 and beyond.
Shareholder distributions
The improved performance over the year and progress in strategic delivery has led to the
board’s decision to increase the dividend. During 2014, the board reviewed the dividend
twice and each time raised it by 2.6%. These increases are part of our strategy to grow
distributions. During 2014 BP completed its $8-billion share buyback programme using
proceeds from the sale of our interest in TNK-BP. Shares worth a further $2.3 billion were
also bought back in the year. In the present environment, returns to shareholders remain a
key priority.
10-year dividend history
UK (pence per ordinary share)
20
10
30
40
05 06 07 08 09 10 11 12 13 1
4
19.15 21.10 21.00
29.39
36.42
8.68
17.40
20.85 23.40 23.85
US (cents per ADS)
One ADS represents six 25 cent ordinary shares.
100
200
3
00
4
00
05 06 07 08 09 10 11 12 13 1
4
209 230 254
330 336
84
168
219
198
23
4
BP Annual Report and Form 20-F 20146