MEMO FROM THE FUTURE: BP

CEO Edition

BOARD STRATEGY SESSION June 2030

TO: BP Board of Directors

FROM: Murray Auchincloss, CEO

DATE: June 2030

SUBJECT: The AI Transition in Energy Operations and the Pivot to Renewables

OPENING

BP has spent the last decade repositioning itself from a legacy oil company to an "integrated energy company." We've invested $50 billion in renewable energy, committed to net-zero by 2050, and built a genuine (if controversial) platform in green energy.

Today, I'm presenting something that executives rarely discuss publicly: how AI is simultaneously saving our oil and gas operations and accelerating our transition to renewables in ways we couldn't have anticipated.

The irony is uncomfortable. But the financial implications are enormous.

THE REALITY

On the renewable energy side, AI is helping us:

• Optimize wind and solar assets with 30-40% better capacity factors through real-time weather prediction and dynamic load balancing
• Reduce renewable installation costs 25% through AI-driven supply chain optimization
• Predict maintenance failures 6-12 months in advance, preventing costly downtime

On the oil and gas side, AI is helping us:

• Extend field life by identifying underutilized geological formations and new production methods
• Reduce extraction costs by 20-30% through AI-optimized drilling and reservoir management
• Cut methane emissions 40% through AI-powered leak detection and prevention

The uncomfortable truth: Our oil and gas operations are more profitable than they've ever been. AI is making legacy energy extremely competitive.

But renewable energy is also becoming vastly more efficient. We're in a race where both horses are running faster.

WHERE WE ARE

Current portfolio: - Oil and gas: 60% of profit, 45% of invested capital - Renewable energy: 8% of profit, 35% of invested capital (expanding) - Bioenergy: 2% of profit, 8% of capital - Hydrogen/emerging: <1% of profit, 12% of capital

Financial performance: - Total revenue: $48 billion - EBITDA: $22 billion - Oil production: 1.8 million barrels/day - Renewable capacity: 8.5 GW (target: 20 GW by 2030) - FCF: $12 billion

The strategic tension: We've committed to "net-zero by 2050" and invested heavily in renewables. But our legacy oil and gas assets are more profitable than ever, and shareholders are asking: Why not double down on what's working?

THE AI OPPORTUNITY

I see three specific ways AI shapes our energy transition:

Opportunity 1: Maximize Returns on Legacy Energy

The play: Extend the life and profitability of our oil and gas operations using AI to squeeze out marginal production and reduce costs.

How: - Deploy AI-driven reservoir simulation to identify untapped reserves in mature fields - Use AI to optimize drilling patterns and extraction rates in real-time - Implement AI-powered predictive maintenance across all infrastructure (30-40% uptime gains) - Use AI for emissions reduction and methane capture (regulatory protection + cost savings)

Estimated impact: - Extend profitable operations 5-10 years beyond traditionally projected lifespan - Reduce extraction costs 20-30%, improving margins 500-700 bps - Avoid $5-10 billion in remediation and stranded asset write-downs

Timeline: 12-18 months to deploy, 5-10 year payoff

Profitability: 25%+ ROI on AI infrastructure investment

Opportunity 2: Scale Renewable Energy with AI Efficiency

The play: Use AI to make renewable energy more cost-competitive than traditional sources, accelerating our pivot.

How: - Deploy AI to optimize wind farm operations (location selection, turbine placement, real-time load balancing) → +35% capacity factors - Use AI for solar forecasting and dynamic pricing in wholesale markets → margins up 40% - Build AI-powered grid management systems (storage optimization, demand prediction) to solve the intermittency problem - Use generative AI for supply chain optimization (35% cost reductions in installation and materials)

Estimated impact: - Renewable LCOE drops from $45/MWh to $25-30/MWh (making renewables cheaper than fossil fuels in 80% of markets) - Renewable operating margin expands from 12-15% to 25-35% - Capacity factor improvements equivalent to 3-4 additional GW of capacity without building new assets

Timeline: 2-3 years to see full benefits

Profitability: 20%+ ROI, with 30-40% better returns on renewable assets

Opportunity 3: Build New Energy Businesses Around AI Optimization

The play: Create stand-alone AI-powered energy businesses that compete on superior operational efficiency rather than scale.

How: - Develop AI-powered "energy optimization as a service" for industrial customers, helping them reduce energy costs 15-25% - Build AI-powered virtual power plant software that aggregates distributed renewable resources - Create AI-driven hydrogen production optimization (electricity costs are the biggest variable; AI can reduce them 20-30%) - Launch data monetization business: BP has 50+ years of geological and operational data; build premium AI models to sell to industry

Estimated impact: - New revenue streams: $2-4 billion annually by 2035 - High-margin software and services: 60-70% gross margins - Competitive moat: AI models trained on our proprietary data are hard to replicate

Timeline: 18-24 months to launch first offerings

Profitability: 40%+ gross margins on software/services

MY RECOMMENDATION

I'm recommending a three-pronged strategy: Maximize legacy energy profits while they exist, aggressively scale renewables with AI efficiency gains, and build AI-enabled services businesses.

Here's why: This strategy acknowledges reality. Our oil and gas assets are profitable. We shouldn't ideologically reject that; we should manage the decline strategically while accelerating the transition to renewables.

The AI efficiency gains in renewables close the cost gap faster than regulation alone ever could. By 2034-2035, renewables are the more profitable business. That's when we can credibly pivot harder.

EXECUTION PLAN

Phase 1: AI Infrastructure Deployment (2030-2031)

Legacy energy: - Deploy AI across all oil and gas operations (reservoir simulation, predictive maintenance, emissions monitoring) - Target: 20% cost reduction, 40% emissions reduction on legacy assets - ROI: 25%+

Renewable energy: - Retrofit existing renewable fleet with AI optimization systems - Deploy AI-powered site selection for new installations - Build AI grid management capabilities - Target: 35% improvement in capacity factors and operating margins

Services: - Launch "Energy Optimization as a Service" pilot with 10-15 industrial customers - Build premium AI models from proprietary data

Investment: $2-3 billion in AI infrastructure and deployment

Phase 2: Portfolio Rebalancing (2032-2034)

• Renewable capacity growth to 20 GW (from 8.5 GW today)
• Renewable profitability exceeds legacy energy (first time)
• Divest non-core oil and gas assets; reinvest in renewables
• Scale services business to $1-2 billion revenue

Investment: $5-8 billion in new renewable capacity

Phase 3: Energy Company 2.0 (2034-2035)

• Renewable energy: 50%+ of profit
• Legacy energy: Cash cow, managed for decline
• AI services: 10-15% of profit, high margins
• Position: "AI-powered clean energy company" rather than "oil company transitioning"

FINANCIAL IMPLICATIONS

By 2035:

• Oil and gas revenue: $18-22 billion (decline from $24B today)
• Renewable revenue: $20-25 billion (up from $4B today)
• Services revenue: $2-4 billion (new)
• Total revenue: $42-48 billion (stable to modest decline)
• EBITDA margin: 42-45% (up from 46% today, due to energy mix shift)
• Annual FCF: $14-16 billion (stable, despite energy mix shift)
• Dividend growth: 3-4% annually (vs. energy sector average 4-6%)

Stock valuation: Energy transition leaders trade at 12-14x FCF (vs. legacy oil at 8-9x). Stock target: £4.20-4.80 by 2035 (from £2.80 today).

CLOSING THOUGHT

BP is uniquely positioned. We have world-class legacy energy assets that AI can optimize for 5-10 more profitable years. We have substantial renewable energy platforms. We have data and operational expertise that can be monetized.

The question isn't whether to transition. It's how fast and how profitably.

I believe AI lets us do it on our terms, with strong returns every step of the way.

Let's execute.

Murray

Confidential — Board of Directors Only