SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
for the period ended 12 April, 2007
BP p.l.c.
(Translation of registrant's name into English)
1 ST JAMES'S SQUARE, LONDON, SW1Y 4PD, ENGLAND
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F |X| Form 40-F
--------------- ----------------
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No |X|
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ADDRESS TO SHAREHOLDERS AT THE ANNUAL GENERAL MEETING OF BP p.l.c.
ON APRIL 12, 2007 BY
PETER SUTHERLAND, KCMG, CHAIRMAN AND
LORD BROWNE, GROUP CHIEF EXECUTIVE
Introduction by Peter Sutherland
Good morning ladies and gentlemen.Thank you for joining us at the 98th Annual
General Meeting of BP p.l.c. here at the ExCeL Centre in London's Docklands.
Seated on the stage with me in the front row are John Browne, group chief
executive; Tony Hayward our CEO designate; Byron Grote, chief financial officer;
DeAnne Julius, chairman of the Remuneration Committee; David Jackson, our
company secretary; Ian Prosser, deputy chairman and senior independent director
- Ian is also chairman of the Audit Committee - and Walter Massey, chairman of
the Safety, Ethics and Environment Assurance Committee.
I am pleased to say that John Bryan now has been able to join us and all the
current members of the Board are on stage with us.
So, ladies and gentlemen, what are my reflections on the year just passed?
Well certainly in my experience it has been one of the most varied and probably
turbulent in BP's long history. We have seen a record oil price and strong
financial results. We have seen the Group face, and continue to face, a series
of regulatory issues in the US - a perfect storm, if you like, but mostly of our
own making.
But we are also seeing the end of a remarkable era as John Browne, our chief
executive, is to retire in July of this year. He has been an outstanding CEO
and I will talk more about him later.
Let me say at the outset that BP is a great company. It has a great portfolio
of assets and excellent people. We have a sound strategy. Your Board is
determined that each one of the company's some 100,000 employees, spread around
the globe, aspire to the same high ideals and values. This is not about
perception - it is about reality. For BP people, the right thing to do is ...
the right thing.
For many years, BP has been a greatly admired Group reflecting its strategic
vision, its determined execution and its high aspirations in areas such as
safety, environment and the community. I remain proud to be chairman of that
company.
As I have said, we set ourselves high standards in the way in which we interact
with the communities in which we operate. Since the Texas City incident, over
two years ago now, we have, in some of the areas in our business, failed to live
up to those standards.
It is therefore vital, that we, as a Board, reinforce the values of the Company
and set the appropriate "tone from the top". This is an important role that we
play. Your Board, this Board, is very conscious of that unique role which it
discharges on behalf of you, the shareholders. The governance and leadership
for which the Board is responsible is key in setting the values that I
mentioned. So as the Company faces more and varied challenges so must we, as a
Board, up our own game.
Reflecting on the recent past it is clear that the governance of a company of
the scale and scope of BP represents a major challenge. Indeed I have been
asked by some shareholders whether the Group has now reached a size where it is
simply too big to be governed effectively. My answer is emphatically in the
negative. Clarity over the role that the Board plays and the tasks it has to
discharge is key to the work of the Board.
In recent times, the role of the Board has been described as either strategic or
monitoring. This was an issue upon which I commented last year. How does a
Board ensure that it is able to monitor the risks which the Company faces whilst
at the same time reinforcing its entrepreneurial leadership to grow the
organisation to create greater value for you the shareholders? These are
questions which we as a Board address meeting after meeting. It is clear to me
though that this Board has the strength and the skills and the independence to
be able to discharge the tasks that are required of it.
We do however have to learn as we go along. We do not have the perfect solution
nor perfect answers to all the issues that face us. It is for that reason that
we, with the executive management, agreed that we would implement the
recommendations of the Baker Panel Report into the context of the tragedy at
Texas City. Let me remind you: the Baker Panel, chaired by James Baker, was
commissioned by the Company, on the recommendation of the US authorities, to
examine the culture of safety at our US facilities. If the Baker Panel had a
criticism of the Board it was not that it had failed to meet normal standards
but that it had failed to excel in the way the Panel believed that it should as
an industry leader.
The Baker Panel also believed that it would help the Board if the Board
appointed a separate expert to advise it on the way in which the Company
implemented the Baker Panel recommendations. The Baker Panel clearly saw that
the Company had potential to become an industry leader around the issues of
process safety and to aid the Company and the Board in that task we accepted the
recommendation of expert help.
It is for this reason that I am particularly pleased to be able to report that
we have made good progress in identifying a person to take on this role. We are
currently finalising the details and expect to make an announcement in May.
As a Board we continue to evaluate our own performance and indeed the way we
operate. We want to ensure that we receive the right information so that we can
discharge our monitoring duties and that the Executive team has got the right
system of internal control so that it too is picking up the right signals.
The challenge is to ensure that the Board discharges both of its functions. It
would be all too easy for the Board to require the Company to turn in on itself
to become ultra cautious and risk adverse.
This is not the nature of BP. With the price of oil remaining higher than
people would have expected three or four years ago, there are new and different
challenges to this organisation. We have done well to establish our position
across the world in seven major areas. Issues in the United States have made us
focus on our dealings at both federal and state level in that continent.
But we also made a major investment in Russia through our acquisition of half of
TNK-BP four years ago. This is a major strategic investment on our behalf and
we as a Board, need to understand the implications of the system within Moscow.
Real opportunities for growth are rarer than they used to be and thus the Board
needs to be in a position to back executive initiatives which will it is
believed really carry the Company forward in the next ten to fifteen years.
Clearly we must ensure that the issues that have occurred in the United States
are dealt with in a responsible and timely fashion. We must learn what we need
to learn. But we must also make sure that we are able to spot the opportunities
to take this Company forward wherever in the world they may arise.
Just as the world continues to evolve, so too does the Board. John Bryan
retires from the Board today. He sat on the Audit and the Remuneration
Committees where his background and experience have been a source of wisdom and
insight. I should like to thank him on your behalf for his dedicated service
and on a personal note, I would wish to acknowledge his contribution and thank
him for his unswerving support over the years. We shall miss him and wish him
and his wife well in the future.
Two directors have been appointed since we met last year. Sir William Castell
and Andy Inglis. Bill joined the Board in July last year. He has substantial
experience in the worlds of business and science having been chief executive of
Amersham International for 14 years. He was subsequently president and chief
executive office at GE Healthcare and remains on the GE Board as a non-executive
director. He is presently chairman of the Wellcome Trust. Bill sits on both
the Audit and Safety, Ethics and Environment Assurance Committees.
Andy joined the Board in February. He is now managing director of the
Exploration and Production segment. Andy joined BP in 1980 and following a
series of commercial roles in BP exploration, he became chief of staff for E&P
and was subsequently responsible for BP's activities in the deepwater Gulf of
Mexico. In 1999 following the BP Amoco merger, Andy was appointed vice
president, US western gas business unit, a position he held until 2004 when he
was appointed deputy chief executive of exploration and production. Andy joined
the Board in February to allow Tony Hayward to focus on the handover of the role
of chief executive to him by John Browne.
Tony will become CEO on August 1, 2007. The Board has been through a very
thorough process in determining John's successor as CEO. All the candidates
were tested and compared in a very rigorous manner. It was the unanimous
conclusion of the Board that Tony Hayward should become the new CEO. Tony, of
course, has been a director since 2003 and has been responsible for Exploration
and Production since that time. Tony joined BP as a graduate in 1982 and has
had an exceptional career principally in the upstream business. I know that you
will all join the Board in wishing Tony well in his new role.
Whilst he will not be leaving the Company until July, this is John Browne's last
appearance before you at an AGM. John has had an exemplary career at BP
spanning over 40 years, the last twelve as chief executive. Earlier this year
when his decision to stand aside was announced I said that John was the greatest
British businessman of his generation who had transformed BP into one of the
largest energy groups in the world. It is really difficult for me to say more
and certainly I would not want to say less.
BP is a great Company. It was as a result of John's strategic vision that BP is
the Company that it is today. It is he who led the consolidation of the
industry nearly ten years ago. This was, and is, a massive achievement. I know
that I speak for the Board, indeed Board members past and present, when I pay
tribute to John's intellect, leadership and skills.
On a personal note I have enjoyed working with John. As in any relationship we
have had our occasional ups and downs but we have worked together for nearly as
long as he has been CEO and for me it has been an invigorating and rewarding
experience.
I believe I speak for the Board and indeed all shareholders and employees when I
say "thank you, John" for all you have done for this Company, and wish you well
for the future.
Before introducing the first Resolution I would like to touch briefly on the
documents which we have sent to you recently. Corporate reporting practice
continues to evolve and indeed is set to do so further. I mentioned last year
that we continued to differentiate our Annual Review and Annual Report
documents; with the Annual Review providing the information required by the vast
majority of our shareholders.
We have taken a further step this year to endeavour to streamline the reporting
processes that we have to comply with on both sides of the Atlantic by producing
a document as our Annual Report that can be used in both markets. We also have
to provide a Business Review in the Annual Report which meets the requirements
of UK Company Law.
Reporting practice is set to evolve further next year with the opportunity to
enhance our use of e-communications as the method of communication with our
shareholders. Our goal is clear. We want to make sure that you, the
shareholder, receive information about the company in the detail that you
require, delivered by the means which you select.
Ladies and gentlemen, let us now discuss BP's performance in 2006 under
Resolution 1 the Annual Report and Accounts. John Browne will now review the
year.
Remarks by John Browne
As always, it is a great pleasure to see so many people here including so many
old friends and colleagues.
This is my last Annual General Meeting as chief executive and I would like to
thank you all for your support over the last 12 years, for your confidence, and
for your patience.
Companies like BP exist only if we can both provide the goods and services which
people want to buy, and if we can secure the trust of those who want to invest
their savings with us.
Your support has been indispensable and without it we couldn't have grown, or
extended our reach into new areas of the world, or taken the first steps towards
the next generation of energy supplies, as we tackle the combined challenges of
energy security and climate change. So thank you.
What I would like to do is first to cover our performance in 2006; then reflect
on how BP has changed in the last 12 years and finally look to the future. I
believe that the fundamentals of BP - our strategy, our assets and the high
standards of our people - are something we should all be proud of.
2006 was a challenging year. We achieved a number of significant milestones and
excellent financial results. However, much of the team's energy and efforts
were directed to the short and long term resolution of various operational
issues, notably the aftermath of the Texas City incident.
Safety has been for many years our top priority. Given that fact, the events of
the last two years have been truly humbling. I will return to this important
subject and our progress in turning BP, in the long term, into a leader in
process safety in a moment.
I will now review the other significant milestones achieved during 2006:
- Our reserves replacement ratio, calculated in accordance
with SEC guidance, was 113 per cent on a combined basis, excluding the effects
of acquisitions and disposals.
- We continued our strong track record with 10 new
discoveries including Kaskida, Titania, Urano and the Uvat area. We secured a
new access option in Pakistan and an initial presence in India and more
recently, in Oman.
- We started nine new upstream projects, notably the
Baku-Tbilisi-Ceyhan oil pipeline and gas condensates from In Amenas in Algeria;
- We re-started Texas City safely and have so far achieved a
production rate of about 250,000 barrels per day;
- We commissioned the first LNG receiving terminal at
Guangdong, China;
- We made significant progress in Alternative Energy,
building momentum in wind and solar through capacity increases; and
- We announced plans to invest $3 billion at the Whiting
refinery in the US to process heavy crudes from Canada.
The trading environment was volatile in 2006 and softened significantly in the
fourth quarter. Energy prices were driven higher during the summer by fears
about political risk to supplies, but fell back by the year end, due, in part,
to a rise in OPEC's surplus capacity and to a relatively warm winter.
The relative price of gas declined by an even greater amount and was
significantly weaker compared to 2005. Our refining indicator margin also
peaked at over $12 in the second quarter of 2006, before narrowing to $6.30 in
the fourth quarter. And retail fuel margins also narrowed significantly towards
the year end.
Turning to our financials, despite the weaker environment towards the end of the
year, we delivered a record replacement cost profit of $22.3 billion, up 15 per
cent over 2005.
- This is equivalent to 111.1 cents per share, up 22 per cent
over 2005, showing the additional benefits of share buybacks.
- The post tax operating cash flow was $28.2 billion, up 5
per cent over 2005.
- We distributed $23.2 billion to shareholders; including
$15.5 billion in share buybacks, thereby reducing shares in issue by around 6
per cent;
- We realised $6.3 billion from disposals; and
- Our financial condition is strong with gearing ending the
year at 20 per cent - at the bottom of our target range of 20 per cent to 30 per
cent.
I know that for those of you who attend the annual meeting, the dividend is
particularly important. Total dividends paid during the year were 38.4 cents a
share or 21.104 pence a share, up 10 per cent on 2005.
But despite having record results, BP had several disappointments in 2006.
We had two oil spills in Alaska, the start-up of the Thunder Horse field in the
Gulf of Mexico was further delayed, with a knock-on impact on Atlantis, and
investigations commenced into allegations of improper trading activities in the
US.
We have taken specific actions to learn from and understand these events and
issues, and to respond to them. Such incidents severely test a company's values
and its people. And a good company recognises where things have gone wrong and
takes responsibility and then makes strenuous efforts to put things right. I
hope we will emerge with some credit for our responses, for admitting where we
have failed, and for our determination to put things right.
I would particularly like to mention the report by former US Secretary of State
James Baker into the safety at our US refineries, which was published in
January. The Baker panel was established by BP at the recommendation of the
Chemical Safety Board, following the terrible accident at Texas City in 2005. BP
has committed to implementing the report's recommendations and we are consulting
with the panel on how best to do that. As the report acknowledges, BP has made
significant changes to its process safety systems since the accident at Texas
City. But we can do more. And we will do more.
As I have said before, the Texas City accident happened on my watch. It was the
saddest and darkest day in my working life at BP. We accepted responsibility.
The safety of our people is our greatest requirement and the greatest memorial
we can build to the 15 colleagues who died at Texas City is a company, which is,
as the Baker report recommends, a leader in process safety.
When we look at BP today, I think it is important to step back, and put it in a
longer term context. As this is my last AGM as group chief executive, I would
like to look back on my 12 year tenure in this position. I would also like to
acknowledge the tremendous platform that was left by my predecessor, David
Simon, on which we have sought to build this great company.
The starting point is strategy. During the last decade, we have operated a
strategy based on economies of scale, quality of assets and being responsive to
market trends. This has created a company with tremendous scope and scale. Our
aim is to build our position in some of the world's largest oil and gas fields,
to focus on advantaged refineries and retail markets, to capture world scale gas
market positions and to participate in fast-growing markets for gas and the
transition to low carbon power and transport.
Since 1995, our total production has grown more than three-fold to 3.9 million
barrels of oil equivalent a day. At the same time, the share of gas production
has more than doubled and we are now one of the largest gas producers among the
major international oil companies with production of 8.4 billion cubic feet per
day.
Our reserves have more than doubled to 17.7 billion barrels of oil equivalent.
Between 1995 and 2006, our market capitalisation has more than quadrupled to
$220 billion and our share price has outperformed the Footsie Index by 18 per
cent and S&P by 14 per cent.
It is not just the scale of our business which has changed, but where we do
business. The number of countries in which we produce more than 100,000 barrels
per day has increased from three in 1995, to eight in 2006. We have also
established a significant footprint in Russia with investments of around $10
billion through our joint venture TNK-BP.
But there is another, more subtle, way in which BP has evolved since 1995 and
that is through our renewed emphasis on sustainability. Indeed we have written
it into the genetic code of the company. The concept of sustainability is
fundamental to understanding a modern company like BP. It is about explaining
our values; our deeply-held belief in the principle of mutual advantage;
recognising that business ultimately has a purpose - to serve human needs. And
it is about respecting the communities in which we operate.
It is because of the importance of sustainability that for the last 10 years BP
has been one of the first major oil companies to face up to the challenges of
climate change. And we have not just acknowledged the challenge, we have taken
actions. We have been reducing the emissions from our own operations, marketing
cleaner products and making substantial commitments to develop our alternative
energy and biofuels businesses.
BP has sustained itself as a company for nearly 100 years. There is much to be
proud of and even more to look forward to.
I have spent all my working life at BP and this is my last annual meeting as a
director. My successor as chief executive is my friend and colleague, Tony
Hayward. He is an excellent choice and will be an outstanding chief executive.
I believe that you can be confident that BP is heading in the right strategic
direction. But more than that, it is a progressive company, willing, where
necessary, to learn from mistakes. For the ultimate purpose of business is a
noble one: to serve human needs and to advance human development. BP generates
its returns for shareholders by investing to provide energy for the basic things
of life, such as light, heat and transport and it aspires to do so in an
ethical, sustainable manner.
Finally, Ladies and Gentlemen, I want to say some personal words of thanks.
I would like to thank you, our shareholders, for your continued support. I
would also like to thank Peter Sutherland and all the board, for their guidance
over the last 12 years. And I would especially like to thank the 100,000 BP
staff in 110 countries that it has been my privilege to lead.
They have been resilient in the face of great challenges, creative in the face
of immense change and unfailingly loyal and dedicated. Above all, they are
universally characterised by their willingness to go the extra mile. I am
incredibly proud and grateful for everything that every one of them does for BP.
Thank you very much.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BP p.l.c.
(Registrant)
Dated: 12 April, 2007 /s/ D. J. PEARL
..............................
D. J. PEARL
Deputy Company Secretary