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BP p.l.c. (NYSE:BP)
Q1 2019 Earnings Call
April 30, 2019, 4:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the BP presentation to the financial community webcast and conference call. I now hand over to Craig Marshall, Head of Investor Relations.

Craig Marshall -- Investor Relations

Welcome to BP's First Quarter 2019 Results Presentation. I'm Craig Marshall, BP's Head of Investor Relations, and I'm here today with our Chief Financial Officer, Brian Gilvary. We are hosting our call today from Los Angeles in the U.S. where we are separately meeting with a number of our venture partners. It's also an opportunity to meet with some of our investors here on the West Coast.

With that, I'll draw your attention to our cautionary statement. During today's 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.

Now, over to Brian.

Brian Gilvary -- Chief Financial Officer

Thanks, Craig, and thank you to everyone for joining us on the call today. I would like to begin by drawing your attention to some changes we have made to our financial statements as a result of the IFRS 16 accounting standard that came into effect on the first of January 2019 for all companies filing IFRS accounts. This new standard changes how we account for leases within our financial statements, but does not change how we run the business.

While IFRS 16 has a negligible impact on underlying earnings and free cash flow, it does require changes to key lines of the income statement and the balance sheet, which we will take you through today. You will also see that we have included further detail in the appendix of this presentation containing further information and we plan to publish these each quarter through 2019. Additional disclosures are also included in the stock exchange announcement, including on Page 2 in the supplementary information and the 2018 annual report and accounts. Craig and the IR team are also available to answer any further detailed questions after the call.

In addition, with a reduced uncertainty of remaining Gulf of Mexico oil spill liabilities, the detailed Note 2 in the stock exchange announcement has also been retired. Changes to liabilities will now be reported in the Additional Information section of the SEA alongside disclosures on cash flow in the quarter.

Turning to highlights from the first quarter, despite a volatile price environment, we have made a good start to the year building on the underlying operational and financial momentum established over the past couple of years. We reported underlying replacement cost profit for the first quarter of $2.4 billion, with underlying operating cash flow of $5.9 billion, including a $1 billion seasonal build in working capital. We continue to make good operational and strategic progress across our businesses.

In the upstream, our operating plant reliability remains strong at 96.2% and we continue to grow our balance portfolio with three major project start-ups further underpinning our 2021 growth targets. We've also taken a number of final investment decisions on key projects and we are progressing and integrating the recently acquired Lower 48 assets into our BPX Energy business.

In the downstream, we have momentum around our growth agenda with a continued mounting expansion into growing markets, notably this quarter in China where we are positioning ourselves to take advantage of growing demand in the region. We also continue to advance our approach to the energy transition, recently announcing progress against our near-term emissions targets. By the end of 2018, we had delivered 2.5 million tons of sustainable greenhouse gas reductions across our business since the beginning of 2016, and our methane, we reported intensity level of 0.2% in 2018, consistent with our target. And we announced the creation of a $100 million fund as part of the ongoing engagement across the business, supporting new emissions reducing projects in the upstream.

Before turning to our financial results, a few comments on the macro environment. Brent Crude recovered from around $50.00 per barrel at the end of 2018 to $68.00 per barrel at the end of March and is currently trading around $70.00 per barrel. The average price of Brent in the first quarter was $63.00 per barrel, compared with an average of $69.00 per barrel in the fourth quarter. The recovery through the first quarter reflects improving compliance around production cuts within OPEC and participating countries, alongside the continuing supply disruption associated with the ongoing political uncertainty in Venezuela.

Strong LNG Supply growth since the end of 2018 coupled with warmer weather caused global gas prices to fall through the quarter, notably in Asian and European markets. In the U.S, the return to more normal storage levels saw Henry Hub gas prices reduce to an average of $3.20 per million British thermal units, compared with $3.70 in the fourth quarter. We expect LNG oversupply to continue through 2019, largely exceeding Asian demand growth, with excess volumes being redirected primarily to Europe.

BP's global refining marker margin dropped to around $6.00 per barrel in January before rallying to around $15.00 per barrel at the end of the quarter, as refining outages, particularly in the U.S. led to reduced inventories. Across the quarter, the marker margin averaged $10.00 per barrel, compared with $11.00 per barrel in the fourth quarter.

Looking ahead, we expect all demand growth to remain relatively robust and supply growth to be modest, with disruptions in Venezuela and Iran continuing and ongoing compliance in the OPEC alliance in the first half of the year. These factors are expected to partly offset the increase in U.S. production, which is currently around 12 million barrels a day.

In North America, increasing offtake capacity from the Permian and a closer matching of production and pipeline export capacity is expected to keep the WTI/WCS differential at around the level seen in the first quarter.

Moving to our results, as I mentioned earlier, our first quarter results reflect the adoption of IFRS 16. This accounting standard brings off balance sheet leases onto the balance sheet in a similar way to how credit rating agencies have historically determined extended net debt in their cash cover ration calculation.

As of the 31st of March 2019, the lease liability on the balance sheet was $10.3 billion, assuming a weighted average discount rate of around 3.5%. Some items have been reclassified within our income statement with operating expenses lower, but offset by an increase in DD&A and interest costs. In total, these changes have a negligible on group underlying replacement cost profit. Further information on the first quarter impact is contained in the appendix and the SEA.

BP's first quarter underlying replacement cost profit was $2.4 billion compared to $2.6 billion a year ago and $3.5 billion in the fourth quarter of 2018. Compared to the fourth quarter, the result reflects lower North American heavy crude differentials and refining margins, as well as lower upstream realizations. It also includes a lower fuels margin result and the impact of upstream portfolio divestments, and turnaround activity in the Gulf of Mexico. This was partly offset by strong supply and trading result in both oil and gas, and a low level of refinery turnarounds.

Compared to a year ago, the result reflects lower downstream refining margins and North American heavy crude differentials, as well as lower upstream liquids realizations, and the impact of turnaround activity in the Gulf of Mexico. This is partly offset by strong supply and trading performance in both oil and gas, an increase contribution from Rosneft, and an improved fuels margin result. Finally, the first quarter dividend payable in the second quarter remains unchanged at $0.1025 per ordinary share.

Turning to cash flow and sources, and uses of cash, to reflect the impact of IFRS 16, we have chosen to adjust how we present source and uses of cash to include lease payments as a use of cash. Lease payments are no longer reported with an underlying operating cash flow, increasing the reported number by around $500 million. Similarly, they are no longer reported within capital expenditure, resulting in a decrease of around $100 million. Taken together, these changes are offset by the addition of $600 million of lease liability payments, meaning free cash flow remains unchanged.

Excluding Gulf of Mexico oil spill related outgoings, BP's first quarter underlying operating cash flow was $5.9 billion, which included the seasonal working capital build of $1 billion. Organic capital expenditure was $3.6 billion in the first quarter. Turning to inorganic cash flows, in the first quarter, divestment under the proceeds totaled $600 million and we made post-tax Gulf of Mexico payments of $600 million. Inorganic capital expenditure was $2 billion, including two further payments to BHP of $1.7 billion. The final two payments to BHP were made in April. We have continued our share buyback program, buying back 6 million ordinary shares in the first three months of 2019 at a cost of $50 million.

Turning to operational highlights in the quarter, in the upstream, we have had a strong start to the year, announcing three of the five planned major project start-ups in 2019; Constellation in the Gulf of Mexico, West Nile Delta Giza/Fayoum in Egypt, and Angeline in Trinidad. We have now brought 22 upstream major projects online since 2016 and have 13 more to go as part of our plan to deliver 900,000 barrels of oil equivalent per day of new major project production by 2021.

We have also taken final investment decisions, or FIDs, on three advantaged oil projects; Atlantis Phase 3 in the Gulf of Mexico, Seagull in the North Sea, and Azeri Central East in Azerbaijan. This recent FID in Azerbaijan sanctions a $6 billion development including a new offshore platform and facilities designed to process up to 100,000 barrels of oil per day gross. The project is expected to achieve first production in 2023 and produce up to 300 million barrels over its lifetime, and as I mentioned earlier,

BPX Energy continues to integrate the Lower 48 assets acquired from BHP into its operations. Full control of field operations was assumed at the start of March and we have 14 drilling rigs operating at the end of the first quarter, including three on our new Permian Delaware acreage and five in the Eagle Ford. We continue to be confident in the delivery of the synergies created by the transaction and are increasing seeing further upside potential that was not assumed in our base case.

Looking to the downstream in fuels marketing, we continue to expand to new markets, adding more than 260 retail sites in the last 12 months. We have opened our first BP branded retail station in Shandong Province, China through our joint venture with Dongming. This marks the start of our plan to add 1,000 new sites over the next five years to our existing network in China of more than 740 sites.

In manufacturing, we have continued to grow volumes of biofeedstock processed across our refineries. We also agreed an expansion of production capacity at our joint venture Petrochemicals facility in South Korea. This will allow us to help meet the region's growing demand and will bring the total capacity of the plant to over 1 million tons per annum. We are also in action across our businesses as we look to advance the energy transition.

In March, we established the Upstream Carbon Fund with a pledge to invest up to $100 million over the next three years supporting projects to deliver new greenhouse gas emission reductions in our upstream oil and gas operations. We also entered a three-year strategic agreement with the U.S. Environment Defense Fund collaborating on projects to reduce methane emissions from across the global oil and gas supply chain. In Air BP, we have recently announced an agreement with Neste to supply sustainable aviation fuel to customers.

Turning to the outlook for the second quarter, in the upstream, we expect reported production to be broadly flat compared with the first quarter. This reflects the ramp up of major projects offset by ongoing seasonal turnaround and maintenance activities in high-margin regions. In the downstream, we expect higher industry refining margins compared to the first quarter, a similar level of North American heavy crude oil discounts, and a significantly higher level of refinery turnaround activity.

Following adoption of IFRS 16, we have updated some of our full-year guidance. This ensures we retain a consistent financial frame, enabling us to continue to track our strategic progress against this guidance, as well as our medium-term targets. Under IFRS 16, we now recognize leases on the balance sheet as right-of-use assets. This results in a corresponding lease liability on the balance sheet, which we've disclosed separately to finance debt. The depreciation of the right-of-use asset is expected to increase our DD&A charge by $2.5 billion for the year. As mentioned earlier, the DD&A charge is largely offset by changes in other items in the income statement, resulting in a negligible impact on group underlying replacement cost profit.

Turning to gearing, as lease liabilities are disclosed separate to finance debt, they are excluded from our definition of net debt and gearing. This ensures gearing remains consistent with the financial framework with guidance maintained within a targeted range of 20-30%. In addition and for comparison purposes, we also report net debt including leases in the stock exchange announcement.

 Following cash payments made during the quarter for BHP's onshore assets, gearing stood at 30.4% at the end of the first quarter. With divestment proceeds to be weighted to the second half of the year and assuming a Brent oil price similar to that seen in the first quarter, gearing is expected to remain around the top end of the 20-30% range for the middle of the year. Organic capital expenditure is expected to remain in the range of $15-17 billion. We will update you on the range through the year, including taking into account the impact of organic capital expenditure arising from IFRS 16.

Now, turning to our medium-term financial frame, organic capital expenditure is expected to remain in the range of $15-17 billion per year. Over the next two years, we plan to complete more than $10 billion in divestments. Our balance sheets and cash cover metrics remain strong. Free cash flow is expected to continue to grow. Alongside the receipt of divestment proceeds and assuming recent average prices, we continue to expect gearing to move toward the middle of our targeted range of 20-30% through 2020.

Finally, we remain confident in our guidance on returns exceeding 10% by 2021 at a $55.00 per barrel real price assumption. In summary, we are entering the third year of our five-year strategy and remain on track to deliver our 2021 targets. Through a continued focus on the disciplined execution of our activity set, we are building strong, strategic, and operational momentum across our business, and are becoming increasingly resilient to external challenges and the evolving energy transition. Our financial frame remains robust with operating cash flow and returns expected to continue to grow. Along with proceeds from our divestment program, this is expected to support growing free cash flow. This in turn should enable the strengthening of our balance sheet and support or commitment to growing distributions to shareholders over the long-term.

On that note, thank you for listening. We look forward to seeing those of you who are attending our annual general meeting, which this year is being held in Aberdeen on the 21st of May.

Let me now turn over to your questions.

Questions and Answers:

Operator

If audio participants would like to ask a question, they may do so by pressing *1. To cancel your question, please press the hash or # key. If you are listening on the web, please submit your question using the web question facility.

Craig Marshall -- Investor Relations

Okay, thank you everybody for listening. We're going to turn to questions and answers now, and a usual reminder to everybody, please, just to limit your questions to no more than two per person so that everybody gets a chance to ask. Let's take the first question, please, from Os Clint at Bernstein. Os?

Oswald Clint -- Bernstein -- Analyst

Good morning, both of you. Thank you very much. Yeah, Brian, I'd like to ask about maintenance, please. I think in the first quarter there was -- you mentioned Gulf of Mexico maintenance, but I think there was some U.K. maintenance, as well, both high margin areas, but you're also talking about high-margin area maintenance in second quarter as well, and I assume there's always some 3Q maintenance. So, I'm just curious, is the level of maintenance this year higher than normal, or is it front-end loaded this year and the second half should be free of maintenance, and ultimately, is cash flow this year potentially less than it should be if this maintenance seems to be a little bit higher than normal?

That's the first question, and secondly, just the lubricants, it's normally your most, let's say, predictable number. It was much weaker in the first quarter. You spoke about some FX and one-off costs. I just wondered if you could quantify those, and is that really the delta here to the weaker lubricant result in Q1? Thank you.

Brian Gilvary -- Chief Financial Officer

Thanks, Oswald. On maintenance and turnarounds, were back into now sort of steady state, the routine flow of maintenance. You'll recall post-2010 we went through a big maintenance program in the upstream, something like 48 turnarounds in 2011, 35 in 2012, and another 25 in 2013. We're now into a more steady state, but as you've already highlighted, in 1Q, we did have the big, high margin Thunder Horse out in a turnaround that successfully came back. 2Q -- we do in the upstream.

There's nothing peculiar about this year in particular, but the timings of turnarounds and when we're doing those, there's nothing peculiar about that, as well, but in the second quarter, we will have three turnarounds in upstream all again in high margin areas, so that will impact 2Q results. It's in Azeri, in AGT, Na Kika in Angola, and PSVM in Angola, so there will clearly be an impact in 2Q, but of course we've also got the ramp up with the three projects coming on stream in the first quarter, another project will come on stream potentially in the second, and then Raven at the back end of the year. That will compensate for some of the lost volumes per those turnarounds.

We've also got in refinery in the second quarter -- in refining, we've got turnarounds across five of our refineries of different scales and different sizes, but typically five to six weeks in each case, and that's really getting the refinery system ready to ensure that we are operating at full tilt with IMO 20202 coming in next year. That's basically what's going to happen as we go through the second quarter.

In terms of lubricant, I think the question came up on the previous call, and indeed the previous call before that. There has been a headwind that the lubes business has been dealing with around base oil prices. That is starting to level off now, so base oil prices have dropped off, actually, in 1Q versus the actual average for 2018, and 4Q, but it will take a period of quarters for that to start to come back through the numbers. I think it's the last of the headwinds that we can see inside lubes, and you'll know the end of last year we announced a big rationalization program of up to 800 jobs that will go out of lubes as part of a bigger efficiency drive. I think you would start to see and anticipate a recovery in lubricants going forward, but you're absolutely right to highlight it's been an issue for the last six quarters now, but a lot of that is being driven by the higher oil process. Notwithstanding where base oil prices go into the future, you will start to see some recovery in those numbers going forward.

Oswald Clint -- Bernstein -- Analyst

That's super. Thank you.

Craig Marshall -- Investor Relations

Thanks, Os. We'll take the next question from Biraj Borkhataria at RBC. Biraj?

Biraj Borkhataria -- RBC -- Analyst

Hi. Good morning for you guys. Two questions, please. The first one's on Macondo. You guided to the $2 billion for the year, but Q1 was just about $600 million, and then also in Q2, you have the predefined payment of, I think, $1.2 billion. Putting those two together suggests very little in terms of bell payments for the remainder of the year, so I just want to get your thoughts on that and whether you feel comfortable with that guidance. Then, the second question is on, more broadly, the market for asset sales at the moment. A number of your peers are executing fairly significant asset sales programs. I was wondering if you could talk about what you're seeing in the market and your confidence in your ability to execute on those, and just related to that, in terms of gearing guidance, getting to the midpoint by year-end, does that assume any benefit or divestments cashed in, or is that on an organic basis? Thank you.

Brian Gilvary -- Chief Financial Officer

Yeah, thanks for that, Biraj. On Macondo, we've said just over $2 billion for this year. We're on track for that. We're really now into the scheduled payments. We're down to sort of affecting all the claims that have now been processed in the bell system and we're simply now into the appeal stage where we have a series of appeals that will go forth to the court over a period of years, and they will get resolved and get taken each quarter. We took a few this quarter, but that number looks pretty well underpinned, and the other payments for scheduled payments in school so we took her but that number and the other payment's for scheduled payments from the settlements from 2012 and the settlements of July 2015. That's pretty much structured now in order going forward and we will live within that, and then for next year, it's gets to more like just over $1 billion a year on a pay-it-forward basis.

Asset disposals, we did $600 million of cash that came in the first quarter. We have a suite of packages in the Lower 48 that we've talked about. I guess we've been surprised by the level of interest in the packages. There appears to be a lot of expressions of interest, and we already have, across three of the package suites, a first round of indicative bids in, so actually, that market looks pretty well underpinned on the disposal side, and as you say, there's a lot of activity in the market, but there's still an awful lot of interest in those assets, both from neighboring companies that you'd expect that are close to proximity of some of those assets, and also from private equity, which we've seen across the piece. They look pretty well underpinned.

On gearing, I think what the guides are giving you is we'll be back toward the middle of the range by 2020, is what we say given that we move to the BHP cash payments rather than using shares, and as the disposals come through now and certainly with the higher oil prices that we're seeing today, we'd expect to see that gearing track down. The big payments around BHP have pretty much now gone out. The balance of those will get paid out this month, in April. In fact, I think the final payment may well have just gone, and so, it's just the Macondo payments that you picked up as the first part of your question to go out next quarter around the scheduled payments. Then, with the oil price where it is today, and we see disposals coming through, certainly in the second half of the year, primarily loaded to the second half of the year, you'll see gearing naturally track down.

Biraj Borkhataria -- RBC -- Analyst

That's very helpful. Thank you.

Craig Marshall -- Investor Relations

Okay, thank you, Biraj. We'll take the next question from Christian Malek at JPMorgan.

Christian Malek -- JPMorgan -- Analyst

Hi, guys. Thanks for taking my question. I appreciate it's quite late in Los Angeles, so I'll keep it to one question. I'm just sort of revisiting the capital frame and just trying to understand better the relationship between the timing of disposals and incremental cash return. Clearly, the progress in the disposal program you'd outlines seems to be well underpinned, albeit, it's very low in Q1. Can you sort of sum up if there is a relationship between your disposals and the ability for you to sort of instigate, or is there a threshold where you can instigate increased shareholder distributions? I know we understand the path to deleveraging, but it would be great to get some more clarity around that outlook on cash return. Is it sequential or can you -- how should we be thinking about it?

Brian Gilvary -- Chief Financial Officer

That's a great question, and the way we think about it is having moving the BHP transaction to a cash-based transaction, clearly that means that you need to be able to absorb that through the financial frame out to the end of this month, and as I've said, our final payment is now gone. Once that's absorbed and the first suite of disposal proceeds come in, that then creates the space for a conversation around dividend distributions going forward. We also have a significant buyback program for the second half of the year that we've committed to around offsetting the scrip, which would be somewhere just north of $1.5 billion, $1.5-1.7 billion of scrip is still repurchase, which is the outstanding scrip that's been issued since 2017 when we got the company back into balance.

I think one of the sort of things that gives us confidence in that, Malek, is actually in the first quarter we cash break even, even with the big turnarounds, with the weather problems that we saw in Northern Colorado around our Lower 48 business, and the portfolio disposals that went out last year. We were still balanced at just over $50.00 a barrel, which is a very good place to be given where the actual flat price is today, and we had to deal with refining margins down -- indicating margins down at $6.00 a barrel at the start of the quarter. I think as we look and reflect on this quarter's results, it's a very resilient portfolio we have, and yes, 1Q was helped by supply trading, which we will have courses from time to time where we get a strong result, but I think that's given us confidence in terms of what the financial frame looks like for the second half of the year, and there will certainly be a conversation around distributions later in the year.

Christian Malek -- JPMorgan -- Analyst

That's great. Thank you very much. Safe travels.

Craig Marshall -- Investor Relations

Thank you, Christian. We'll take the next question from Lydia Rainforth at Barclays. Lydia?

Lydia Rainforth -- Barclays -- Analyst

Thanks, Craig, and good morning. Two questions if I could, the first one just on the unit of packed unit opex side. That looked like it was down 4% year-on-year, but I didn't know if that was just IFRS 16 or if you're still seeing underlying progress on the cost base, and then second, given that you are in LA, can you just talk about what venture partners you have and what that -- in terms of what they are offering the BP business? Thank you.

Brian Gilvary -- Chief Financial Officer

Thanks, Lydia. The unit opex is all IFRS 16, so actually, we are sort of flat year-on-year, which given where oil process are I think is a good result at this point and the ramp up that we have that we can see this coming through, but effectively, that's IFRS 16, so DD&A has gone up and the operating costs have come down. It's been quite a noisy quarter trying to get the IFRS 16 numbers through. We've tried to give you a variety of tables to help explain what those movements are.

If you look at the venture piece we're doing this week, we've got the whole executive team out here. We've got various conferences that the different members of the executive team are meeting and involved with, but then we've got two days with a lot of our venture capital. The guys are out at the biosciences institute that we have here in San Francisco tomorrow, so we've got a whole team which will be visiting our -- which is a BP biosciences institute. Then, for the rest of the week, we're meeting with various companies that we've invested small seed investments in and it gives us a sense of how they are progressing Some are disruptors in terms of the business that we operate in. Some are going to help us be able to enhance some of the things that we're doing. There will be a variety of companies that we'll be talking to, companies like Fulcrum and FreeWire that we've talked about before on these calls, FreeWire around mobile charging in some of our stations, and Fulcrum, which basically takes waste to create jet fuel with the first pilot plant that is being commissioned out here in California. It's going to be quite a wide-varied suite of companies that we'll be talking with and it will give us a little bit of a sense of how things are progressing in a number different spaces.

Lydia Rainforth -- Barclays -- Analyst

Perfect, thank you.

Craig Marshall -- Investor Relations

Thanks, Lydia. We'll take the next question from but I think he thanks Lydia will take the next question from Alastair Syme at Citi. Good morning, Alastair.

Alastair Syme -- Citi -- Analyst

Hey, good morning, Craig and Brian. Could I just ask about the gas trading just to get a perspective on where the gain came from? Is it sort of your position to cross the book for the weaker European and Asian pricing, or is it more to do with the volatility, and is there any way you can help us think about the magnitude of that gain?

Brian Gilvary -- Chief Financial Officer

Yeah, we wouldn't normally get into a lot of detail, but I can give you a sense of, in terms of gas trading, a proportion of it came out of a very strong result out of North America, which is really positioning on some of the books around the cold weather that we saw that came through, which our basis positions allowed us to be able to capture the benefits of that, and also around our LNG book, which was really focused out of European gas, and some of the LNG prices that we saw as the oil price weakened, it allowed us to play some arbitration plays that we had across the Atlantic. It was across the piece, but I would say the big two chunks of the over-performance in 1Q was United States and LNG out of Europe.

Alastair Syme -- Citi -- Analyst

I guess I'm getting it's a bit broader, given there's still disconnect between [inaudible] oil enterprising in Asia and Europe. Is the book still set up potentially to benefit from 2Q, 3Q, that kind of trend?

Brian Gilvary -- Chief Financial Officer

Yeah, I can't really call it by quarter. We have a book where we have what you'd expect. We have a number of equity positions. Then we have a book of structural shorts that enable us to manage the arbitrage of the various prices that we have on those books, and some of those shorts are hub-based, some of those are Asia oil-related prices, and some of those are European prices, and some allow us to optimize across the piece, but I couldn't call it quarter by quarter that there's -- certainly wouldn't reveal now that there's a structure that's sort of sitting there for 2Q, but it'll be really around how we can optimize the various shorts that we have and the ability to able to trade some LNG molecules into those.

Alastair Syme -- Citi -- Analyst

Finally, was there anything you could do to help us with magnitude?

Brian Gilvary -- Chief Financial Officer

I'm sorry. Say that again.

Alastair Syme -- Citi -- Analyst

Was there anything you could do to help us think about the magnitude of what happened in 1Q, the gain?

Brian Gilvary -- Chief Financial Officer

Yeah, now, look, a strong result is normally we have an average quarter result that we expect for trading. The indication of strong would normally mean that it's certainly over $100 million more than we would have expected in a typical quarter.

Alastair Syme -- Citi -- Analyst

Okay, brilliant. Thank you very much.

Craig Marshall -- Investor Relations

Thanks, Alastair. We'll take the next question from Jason Gammel at Jefferies. Jason?

Jason Gammel -- Jefferies -- Analyst

Thanks very much, guys. A couple on the downstream, if I could, please. Can you first of all talk about the situation at Whiting right now in terms of apportionment on the pipeline system, and if you have any scheduled maintenance on Whiting specifically as we head into 2020. Then, the second one is just on the marketing business. It's clearly been a source of earnings strength for you recently. I was hoping you could maybe talk about the magnitude of the increase in earnings that you're seeing in the marketing business as a result of expansion.

Brian Gilvary -- Chief Financial Officer

Yeah, maybe on that last one, what we saw quarter on quarter versus last year in the fuels piece, something close to $300--400 million of growth. A chunk of that came from the trading result that we talked about in terms of oil trading in 1Q, but fuels marketing, we're continuing to see growth year on year, and this is the strategy Tufan and the team are executing very effectively. One example of that would be Mexico where we've effectively gone within 18 months from a standing start we're now pumping more volume than we pumped as the number two player in the Netherlands, just to sort of put it into context. The build-outs and growth of the fuels marketing strategy along with the convenience offer has become a very effective part of the portfolio, which is underpinning those pinning that we've set out there in terms of $9-10 billion by 2021 of EBITDA free cash flow.

Sorry, what was the second question?

Jason Gammel -- Jefferies -- Analyst

Just the situation at Whiting related to apportionment and whether there is any maintenance planned at Whiting before IMO 2020 kicks in.

Brian Gilvary -- Chief Financial Officer

Yeah, I think we've got one small unit at Whiting that will be going through maintenance this year getting ready for IMO 2020 next year, and on apportionment, you'll be aware the Alberta government effectively curtailed production to the tune of about 325,000 barrels a day in, I think, late December, early January. We've seen that back off a little bit, but we would expect to still see -- I don't think you're going to see the sort of levels of light-heavy diffs that we saw last year. There are a number of things exacerbating that issue.

There are the Canadian issues where we think curtailment will start to ease and we've already seen that crew production curtailments are alleviated to about 250,000 barrels a day in February and we'd expect to see gradual reductions to bring that back into where we were before, but equally, you're also seeing Venezuelan heavy production off the market through the sanctions, and therefore you're seeing a tightness in general light-heavy diffs, which has exacerbated them when you look at the WTI/WCS diff, and you're seeing the opposite with light crudes coming out of the United States, the availability of light crudes. I think that's going to be a structural thing that we're going to see we'll certainly see over the next six to 12 months, so I wouldn't expect to see big movements in light-heavy spreads going out for the rest of this year, but as the Canadian production starts to alleviate, you'll start to see the spread open up more than what we see today, and we certainly saw it down at, I think, around $9.00 at one point during the first quarter and it's gone moved back up to, I think, $12-13.00 now.

Jason Gammel -- Jefferies -- Analyst

Very helpful. Thanks, gentlemen.

Craig Marshall -- Investor Relations

Okay, thanks Jason. We'll take the next question from Thomas Adolff at Credit Suisse. Thomas?

Thomas Adolff -- Credit Suisse -- Analyst

Good morning. Two questions for me, please. Firstly, just operationally as you look at the first quarter of this year, or call it almost half way through your five-year plan, is this so far consistent with your internal assumptions? Are there any areas where things didn't go according to plan or areas that significantly surprised on the upside? Secondly, just going back to the question on trading, correct me if I'm wrong, gas trading is booked in upstream and oil trading is booked in downstream, and perhaps you can comment on the oil trading side of things, how that compared on a quarter-on-quarter as opposed to year-on-year. Thank you.

Brian Gilvary -- Chief Financial Officer

Thanks, Thomas. Operationally, I think actually it was a stronger course of 1Q in terms of the upstream than we might have anticipated. I think availability is up around 96.2%, which is a pretty strong -- it's a very strong number in the context of a single quarter. To be able to maintain that through the year would be an exceptional result, but 96.2% for the first quarter was very strong and certainly higher than we would have expected for our plans, but I think that reflects on the fact that we knew that we also had the Thunder Horse turnaround to deal with. Operationally, it was probably a slightly better course than we would have expected in the upstream. On the downstream, I think it looked more like an average quarter for 1Q.

Then, on the trading result, you're right, the gas trading gets reported through upstream, the oil trading gets reported through downstream, and certainly, this was a unique quarter that both divisions generated strong results in both of those, and then you will have seen some of that flow through to the downstream result, similar orders of magnitude that I talked about around gas trading in terms of being an average quarter, sort of hundreds of millions of dollars compared to, say, double-digits. No, it was a good quarter.

Thomas Adolff -- Credit Suisse -- Analyst

Perfect, thank you very much.

Craig Marshall -- Investor Relations

Thanks, Thomas. We'll take the next question from Irene Himona at Societe Generale. Irene?

Irene Himona -- Societe Generale -- Analyst

Yes, good morning. Thank you. Two questions, please. Firstly, VPX, obviously the first full quarter with the BHP asset, but I know that the production cost per BOE is up both sequentially and year-on-year by double-digit. I wonder why that was and what you anticipate going forward. Secondly, Brian, you referred briefly to IMO 2020. Have you seen any impact from that in the market? If not, would you expect to see any changes to product and crew differentials in the second half of the year? Thank you.

Brian Gilvary -- Chief Financial Officer

Yeah, so on the BPX, the simple answer is BHP, the sort of more orderly side of their portfolio carries high unit production costs than the legacy BPX, but also, we had the volume outages with that weather, the arctic polar vortex that hit Northern Colorado with about 8' of snow, and there are some quite astonishing pictures of the assets being under snow. Therefore, some production was curtailed, so I think it's a combination of both, but I think primarily it's driven by the fact that the unit production costs of the BHP assets that we acquired are at a higher level than the BPX legacy ones.

In terms of IMO 2020, everything looks pretty well set in terms of compliance and I think you'll start to see in the back end of this year that will help underpin, certainly, margins going forward, that end of the barrel, and we are expecting to see compliance and adoption. There'll be the odd place in the world where I think exemptions will be put in place, but I don't think they're going to be significant, so I think there will be some upside and underpinning of the numbers going forward in terms of margins by the back end of this year.

Irene Himona -- Societe Generale -- Analyst

Thank you.

Brian Gilvary -- Chief Financial Officer

Thanks, Irene.

Craig Marshall -- Investor Relations

Thanks, Irene. Okay, we'll take the next question from Michele Della Vigna at Goldman Sachs. Michele?

Michele Della Vigna -- Goldman Sachs -- Analyst

Thank you, Craig. Brian, two quick question if I may. The first one relates to the production from your new project. You reiterated a target of 900,000 barrels per day by 2021. I was wondering how much they have contributed to the first quarter production. Secondly, on BPX, we are seeing cost of completion in the U.S. coming down from the beginning of the year. I was wondering when you would think it would be optimal to start to ramp up the activity in the Permian. Thank you.

Brian Gilvary -- Chief Financial Officer

Okay, so on that last question, Permian, we're already up to three rigs, and in fact, we've got eight rigs now working, five at Eagle Ford, three in Permian, from the new acreage, so things are already starting to ramp up and we'll be able to -- I think because the previous question highlighted we've only got a month's worth of BPX now. I think when we get to the middle point of the year we'll be able to give you a much deeper update on synergies, which look pretty well underpinned from what we can see. In fact, actually, the assumptions on synergies now look somewhat conservative given what we've discovered in terms of the operations and what we've been able to absorb within our existing structure, and we'll be able to give you more of an update on where we are in terms of costs and integration, and reabsorbing that business, so I think there will be more to follow on that in the middle of the year.

In terms of the ramp up of major projects, it's up over 500,000 barrels a day from the 22 start-ups that we've had up to the end of 1Q '19. In fact, it's between 500,000 and 600,000 barrels a day that is now on stream and online, and the track looks pretty good now in terms of that round for full 900,000, and of course BPX sits on top of that 900,000 barrels a day [inaudible]. I think things are looking pretty well underpinned. All the projects we need on the stream FID'd or in operation now, and that's why we feel so confident about the 2021 targets and delivery of those, given a lot of the portfolio is now being derisked by those projects coming up. Of course, we have the three that came on in the first quarter, which derisks another big piece of the portfolio, with the big two major ones now in the second half of the year of Culzean and Raven in Egypt.

Michele Della Vigna -- Goldman Sachs -- Analyst

Thank you.

Craig Marshall -- Investor Relations

Thanks, Michele. We'll take the next question from Lucas Herman at Deutsche Bank. Good morning, Lucas.

Lucas Herman -- Deutsche Bank -- Analyst

Yeah, good morning, gents. A couple, if I may. Brian, first, just going back to you with profitability, and maybe this comparison is unfair given it's different quarters, but I'm slightly staggered that the reported EBIT in the U.S. can move from $1.4 billion in Q4 to $600 million in Q1 given the modesty, shall we say, of the production down and a relatively limited overall decline in price. That was the first, just some better understanding of that costly move. The second, there's always a tension between return and resource in the industry and I just wondered how you feel strategically about your position in Brazil at the present time, the acreage you have, and whether the company would like to have a more material position going forward. Obviously, we've referenced the sale of rights that's expected later on this year and how BP might be thinking about that opportunity. Thanks, guys.

Brian Gilvary -- Chief Financial Officer

Thanks, Lucas, and yeah, absolutely right about the U.S. underlying earnings. It is three areas that have driven that reduction of $1.4 billion down to $600 million, which, again, you'll find inside the SEA. The first one is the low realizations of $51.00 a barrel in 1Q versus $62.00 a barrel in 4Q, so you've got the actual realizations because there is some lag effect that comes through in those numbers. There's also lower U.S. natural gas realizations. I think they come in around $2.60 versus $3.10 in 4Q, and then, of course, the third large item would be Thunder Horse. I mean, that in some respects shows you and demonstrates quite clearly the importance of those high margin barrels coming through the portfolio. That really makes up -- those three components make up 85% of what we can see there in terms of underlying [inaudible].

In terms of returns and capital frame, Brazil, of course, is very interesting for us. We went into Brazil back in 2009, 2010 with the Devon acquisition. That allowed us to find some commercial resources, but didn't really play out the way we may have anticipated, and there are clearly opportunities for us going forward. I think the key is, similarly with what we did around BHP, anything we look at needs to be accretive for our existing business to the degree that we get production that is accretive to earnings, both on a cash and earnings basis, and returns, and can be lived with within our capital frame because we've set a capital frame of $15-17 billion. If we have to step outside of that, then we need to find other parts of our portfolio that we can liquidate to pay for that potential growth. It's no different to what we've looked at around BHP position where we've come up with a pretty significant suite of disposable that will cover half the investments inside there, but yes, Brazil's of interest. It's going to be of interest to everybody given the attractiveness of those assets, but we have to be sure we could do that within our existing financial frame.

Lucas Herman -- Deutsche Bank -- Analyst

Okay, many thanks, and I wish you a good night's sleep.

Craig Marshall -- Investor Relations

Thank you, Lucas. We'll take the next question from Martijn Rats at Morgan Stanley. Martin?

Martijn Rats -- Morgan Stanley -- Analyst

Yeah, good morning, or I should say goodnight. I only have one left. You mentioned briefly a joint venture you set up with Neste Oil, renewable jet fuel, and when you answered Lydia's questions on private equity and other sorts of technology partners, she also mentioned a partner that is looking at renewable jet fuel. I was wondering; if these are fuels, I would imagine at the moment that BP cannot make it itself, but where you are seeing a growing market. I was hoping if you could elaborate a little bit on this.

Brian Gilvary -- Chief Financial Officer

Yeah, Martin, that's a great question. I think it tells you a lot about how this space will play out into the future as we think climate change and the desire to try and get less carbon intensity in the portfolio as we meet this jewel challenge of eradicating poverty, growing energy. There will be a variety of partnerships that will come up. Neste was an interesting one for us. It was specific to aviation fuels out of Sweden, and there's no question, the aviation will grow at a rapid rate going forward as a relatively small part of the population have ever flown on airplanes, and that's likely to grow into the future, and finding a solution to what that looks like will require the development of more sustainable of aviation fuels. Fulcrum is an example of what we're trying to do around waste, taking basically household waste and creating a bio jet fuel, which would be a solution for the future for the planet. This was just another example, but I think what you're going to find is in this space of reducing carbon intensity, it will throw up a number of joint ventures and potential collaborations across the piece as we all try to do our piece in terms of trying to manage climate change effectively in terms of carbon intensity going forward.

Martijn Rats -- Morgan Stanley -- Analyst

All right, thanks very much.

Craig Marshall -- Investor Relations

Thank you, Martin. We'll take the next question from Chris Kuplent at Bank of America. Chris?

Chris Kuplent -- Bank of America -- Analyst

Yeah, thank you very much. I've got two questions left, although my typical disposal question has already been answered, so thanks for that, Brian. Just on buybacks, you very helpfully showed us or mentioned the scrip amount of issuance you're trying to offset by the end of this year. Can you remind us why you picked Q3 '17 and what we might be able to look forward to beyond 2019 in terms of future buybacks linking those to historical scrip dividends up until Q3 '17, which I think is still around in the billions. The second question, BP is still adhering to a downstream/upstream segmental reporting structure. Are you of the view that as you increase, let's say, earnings contributions from higher multiple businesses as your lower carbon business grows, are you of the view that it might make sense to split them out separately in your reporting? Thank you.

Brian Gilvary -- Chief Financial Officer

Thanks, Chris. On the first question 3Q '17, actually, it was the point of which we declared that we were back into balance of $50.00 a barrel, and therefore we severed offset scrip from that point forward, and I think the actual figure that's now outstanding is something like 231 million shares that have not been bought back since that point in time, since about -- I think it's about $1.5-1.7 billion depending on the share prices. Our buybacks required going forward will be close to $1.7 billion, but it is effectively determined by that point in time, but what we compared it to in 3Q is we would fully offset scrip on a point-forward basis, which is what you should expect us to do, and the $50.00 a barrel I quoted for 1Q included scrip on a cash basis more like, I think, $42.00 a barrel given the large scrip uptake that we had in 1Q, but that's been added onto the outstanding shares going forward.

Then, in terms of segmentation, I think once those businesses become significant, then we will look at -- maybe there are further disclosures. We've done that around fuels, chemical, and lubricants, which you can see the subsegment divisions that we put in place back in, I think, 2010 or 2011, I think we went to subsegmentation of those businesses, maybe even earlier than that. Of course, we give you a lot of information around BPX. I think as our renewables, so some of the alternative energy businesses like biofuels, wind, and solar become significant enough and material enough, we will look at whether we provide more information around those, but they're still in the build phase over the next five to 10 years as we build those businesses out, but they will become a more and more important part of our portfolio going forward.

Chris Kuplent -- Bank of America -- Analyst

Okay, thank you, Brian, and just to confirm, whatever then you do from 2020 onwards in terms of a shareholder remuneration, you will not exclusively link to what occurred in terms of scrip issuance before that moment in time, 3Q '17, is that right?

Brian Gilvary -- Chief Financial Officer

Well, no, so we took 3Q 17' because it was the point at which we got back. I mean, the call at the end of 2014, we were about $2 billion cash, you'll remember from your various notes, but we were around about $2 billion surplus cash in '14, off the back of the big Rosneft TNK transaction that we did. We were able to get the balance sheet back in structured order. That put us in a strong position as the oil price directed through '15, '16, '17, and we set a target of getting back into balance by the end of '17 and that's why we chose that particular point in time, but the board has minded to look at distributions in the broad sense of buybacks over and beyond scrip, and that will continue, which we did if you recall around TNK and Rosneft. We bought back $10 billion of stock off the back of that transaction. We will look at buybacks as part of the suite of options for us going forward, and so I think the key is we commit to offset scrip, which was helpful for us during the old price correction, but we don't like the dilution, but shareholders generally like the scrip uptake and that's why you saw a large uptake in 3Q of over 30 percent. We'll continue to offer scrip on a quarterly basis, but that will be determined by the board each quarter.

Chris Kuplent -- Bank of America -- Analyst

Okay, thank you.

Brian Gilvary -- Chief Financial Officer

Thanks, Chris.

Craig Marshall -- Investor Relations

Thank you, Chris. We'll take the next question from Peter Low at Redburn. Peter?

Peter Low -- Redburn -- Analyst

Hi, thanks for taking my question. You've been in control of the BHP assets for almost two months now. Can you give us any color on how your view of those assets have changed, particularly that potential since the deal was stuck? Then, secondly, you previously talked about seven potential upstream FIDs in 2019. You've done three so far. Can you give us any guide on which other projects you're hoping to sanction this year? Thanks.

Brian Gilvary -- Chief Financial Officer

Great, thank you. In terms of BPX, it is literally two months in and the guys have also been dealing with the issues around the weather around the existing asset portfolio and getting suites of assets ready for sales, so I think what I would say is we've got eight rigs up and running now in the new acreage. We're learning from those. I would say everything we have seen, we would be more positive on now than when we actually did the transaction. Synergies look pretty well underpinned. The price assumptions we had are significantly above what we'd assumed. If you think of the time we had a long-term midland diff going to somewhere around $4-7.00 a barrel.

Today, it's almost parroting. It's just about $1.00 below given the NGL pipelines and infrastructure that was put in place in the first quarter, and there is more pipeline infrastructure to come in, so we can actually see now midland pricing pretty much at WT I, so that's more positive, and certainly, the absolute flat price of where we are today makes that more accretive from a -- in terms of the front-end value accretion, it's well underpinned now off the back of the environment synergies, and now of course we have the assets and I would say everything we see so far is pretty positive, but we'll give you a fuller update at the 2Q results where by then we'll have five months' worth of operation and we'll be able to give you some early views on some of the results that we're seeing from the activity.

Peter Low -- Redburn -- Analyst

Okay, and just on the potential other FIDs this year?

Brian Gilvary -- Chief Financial Officer

Yeah, sorry. We've already had Atlantis, Seagull in the North Sea, and Azeri Center East FID this year. Areas that we would be looking at, we don't normally go into detail on those, but it they'll be things like Thunder Horse water injection. There is still KG D6 in India and potentially around the Herschel development, which we'll be looking at. There's also Thunder Horse south expansion that was also put in place in March 2019, but it's a question of phasing, but that's the kind of suite of options that we're looking at. There are eight FIDs, four of which are gone already now with a potential four more.

Peter Low -- Redburn -- Analyst

Okay, thank you very much.

Craig Marshall -- Investor Relations

Okay, Peter. We'll take the third-last question from Colin Smith at Panmure Gordon. Colin?

Colin Smith -- Panmure Gordon -- Analyst

Yeah, hi, thanks for taking my call. Just to follow up on the scrip again, at the end of 3Q '17, you had 19.8 billion shares outstanding and you've now got 20.3 billion shares. That looks like you need to buy back more like 530-odd million shares in order to take yourself back then to the period end number at the end of 3Q 2017. The number you're talking about is considerably less than that and I was just wanting to understand what the difference was.

Brian Gilvary -- Chief Financial Officer

The actual scrip issuance is about 231 million outstanding shares. There may be other shares that will have been put into issue around long-term intensive plans for our employee schemes where shares will have been issued against those treasury shares, but I couldn't come back. We can come back offline and give you a box balance of what that looks like, but in terms of the scrip, which is something we track, I've got a chart which I carry around with me so I can keep track of it myself, it's about 231 million shares now outstanding from when we first announced the buyback program.

Colin Smith -- Panmure Gordon -- Analyst

Okay, thanks.

Craig Marshall -- Investor Relations

Thanks, Colin. We'll take the next question from Pavel Molchanov at Raymond James. Pavel?

Pavel Molchanov -- Raymond James -- Analyst

Thanks for taking the question. At the beginning of the year in the strategy update, you laid out some pretty hefty exploration prospects in Azerbaijan, and I believe they were supposed to culminate in Shafag-Asiman, which is over 10 million BOE in scale. Can you give an update on what the calendar is going to look like in terms of actually deploying the rigs and drilling those prospects?

Brian Gilvary -- Chief Financial Officer

I think if you look across the whole -- I can't give you the specifics on the Azeri position, but if you look across the whole piece, we've got somewhere around 25 exploration wells that we're looking at in 2019 and whether they all get executed or not will be a matter of choice around the rig selection, but up to 25 potential exploration wells this year and we've already got one discovery announced so far from the program and so far year-to-date. We will come back to you on more detail offline around the Azeri prospects, which I don't directly have in terms of where that program is at the moment.

Pavel Molchanov -- Raymond James -- Analyst

Okay, turning to an issue in Washington that's been coming up, in February, there was a bill called DAFKA which would essentially upsize energy sectoral sanctions against Russia reintroduced in the U.S. Senate. It hasn't been voted on yet, but given that it would effectively ban any U.S. domicile or U.S. operator from participating in Russian energy projects above $5 million a year, given your relationship with Rosneft, have you estimated or made any analysis of what kind of divestiture or changes in your capital spending would have to be made if this bill were to pass?

Brian Gilvary -- Chief Financial Officer

Look, we operate around the world and operate within the sanctions framework that sits in place in the places that we operate, and we try and work as closely as we can with relation states that deal with specific issues around specific countries. There is nothing right now on the table in terms of enactment of any new policy or laws that would trigger any changes to the way in which we're operating our business today, particularly around Rosneft and Russia, but we would work in tandem with whatever legislator goes through with in terms of potential sanctions and in the same way we've been operating within the existing sanction framework. We would look to that on a go-forward basis in those geographies, but there's nothing specific I could lay out for you today that would get into any details since we have nothing that has actually gone into legislature at this point in time, and we run various scenarios around potential outcomes of what that could look like, but we wouldn't really go through those on this call.

Pavel Molchanov -- Raymond James -- Analyst

Okay. Thank you very much.

Craig Marshall -- Investor Relations

Thanks, Pavel. We'll take the final question from Bertrand Hodee at Kepler. Bertrand?

Bertrand Hodee -- Kepler -- Analyst

Hello. I have one question left. You mentioned that you expect and we are many to expect that energy spot pricing in Asia and European gas prices to probably stay low for a couple of quarters. What kind of headwinds do you see on your cash flow earnings resulting from that figuring weakness? BP has real exposure upstream to the European gas price, but do you believe this will have an impact on your energy trading business and can you help us quantify that, especially if spreads between basins stay low?

Brian Gilvary -- Chief Financial Officer

I think, firstly, you're right. I think we can see and overcapacity coming through, certainly in the second half of this year and probably into 2020 around LNG projects coming on stream. We've seen prices already correct down to somewhere close to $5.00 an MMBTU in terms of European and Asian pricing right now. I suspect that's going to continue and I think you'll also see more exports coming out of the U.S.A. in terms of Hub exports coming out all exacerbated. From an LNG trading perspective, anything that creates volatility creates opportunity, so I think the way in which our portfolio is set up within LNG and that may open up some opportunities in terms of the way in which we've structured both our longs and shorts, in addition to our equity positions. The different pricing bases that we have do provide some opportunities for us, so I wouldn't signal necessarily a lower LNG price would necessarily impact the value that we can create through our LNG and gas trading businesses because we run them as a portfolio of assets. Where we see low volatility, it's more difficult to extract value, but other parts of that portfolio may well see volatility. Tangential volatility may appear that will allow to capture some of that value. Don't take a read through that lower LNG price necessarily means lower performance out of the gas trading business.

Bertrand Hodee -- Kepler -- Analyst

Okay, great. Thank you and I have one follow up concerning your U.S. Lower 48 divestment program. How many packages do you believe you will be able to sell before year-end and what kind of proceeds are you expecting in your plan to be executed in terms of U.S. Lower 48 divestments this year?

Brian Gilvary -- Chief Financial Officer

When we announced the BHP deal, it was $10.25 billion acquisition, the final price and we simply then disposed of $5-6 billion of assets, predominately upstream and predominantly Lower 48, so it's not all $5-6 billion, but the packages are all being progressed and marketed. Some are a little bit slower given the weather issues that we had, which may lead to sort of pushing those off. It's a $10 billion program in total over two years, is what we've committed to. $600 million in proceeds have come through in the first quarter. A small proportion of that was actually out of the Lower 48. I was a $120 million package that we did in the Lower 48 in a legacy business that we had.

I think they are pretty much locked and loaded. There's a lot of interest in the assets. It's $10 billion over two years. You would hope to deliver at least 40% of that in the first year, but certainly in terms of this year, a lot of it is back end loaded, and so you'll see that come through. Some of it may slip into next year, but I could easily see $4-5 billion this year with the potential for some of that flowing into 2020, depending on actual closeout of some of the deals, but things are well under way in the disposal process and it's pretty well underpinned.

Bertrand Hodee -- Kepler -- Analyst

Great. Thank you.

Craig Marshall -- Investor Relations

Thank you, Bertrand. Okay, that's the end of the questions. Let me just hand over to Brian for some closing comments.

Brian Gilvary -- Chief Financial Officer

Yeah, well, I think it's still morning where we are here in Los Angeles, and thank you for your patience and time today. As we've laid out, this is the third year of our five-year strategy. I think the quarter was a resilient -- I'll describe it as a resilient set of results given the backdrop of weak prices coming into the quarter, weather issues, the portfolio disposals from last year, and the big turnaround we had at Thunder Horse. I think with the strong trading results, it actually led to a very resilient, robust result for us this quarter, so I think as we looked at this plan for this year, 1Q is always going to be tough, and I think we've come through that with a solid set of results.

We remain on track to deliver our 2021 targets, as we've laid out for you today around the projects already on stream, and how that's underpinned with the financial frame unchanged. We've made good progress on our reduce, improve, create framework in terms of reducing emissions, and we talked about the end of last year that we've now taken out 2.5 million tons of CO2 from our portfolio since 2016 and the Paris Agreement, and you're going to see the balance sheet naturally deleverage into the second half of this year as disposal proceeds come in and the payments from 1Q and 2Q for both BHP and Macondo roll off. I think as we look forward, we'll continue to maintain a strong capital disciplined frame within our remit of safe and reliable operations.

With that, thank you very much for your patience, and we look forward to talking to you at the next call, 2Q, and for those of you that can't make the AGM in Aberdeen this year, we'll get a chance to catch up with you on progress after that, so thank you very much.

Duration: 59 minutes

Call participants:

Craig Marshall -- Investor Relations

Brian Gilvary -- Chief Financial Officer

Oswald Clint -- Bernstein -- Analyst

Biraj Borkhataria -- RBC -- Analyst

Christian Malek -- JPMorgan -- Analyst

Lydia Rainforth -- Barclays -- Analyst

Alastair Syme -- Citi -- Analyst

Jason Gammel -- Jefferies -- Analyst

Thomas Adolff -- Credit Suisse -- Analyst

Irene Himona -- Societe Generale -- Analyst

Michele Della Vigna -- Goldman Sachs -- Analyst

Lucas Herman -- Deutsche Bank -- Analyst

Martijn Rats -- Morgan Stanley -- Analyst

Chris Kuplent -- Bank of America -- Analyst

Peter Low -- Redburn -- Analyst

Colin Smith -- Panmure Gordon -- Analyst

Pavel Molchanov -- Raymond James -- Analyst

Bertrand Hodee -- Kepler -- Analyst

Duration: 68 minutes

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