Anyone invested in BP (NYSE:BP) for a long time probably hasn't been too impressed with its performance. On a total return basis, the company has gained only 11% over the past decade, the worst showing among the integrated majors over that time frame. Some of the causes of the underperformance were specific to the company -- namely, Deepwater Horizon -- while part of it had to do with the general malaise in the oil industry.

Based on management's most recent conference call and presentation, though, BP thinks those days are behind it. If this past year's earnings were any indication, BP's next few years should be much, much better than the past decade. Here are a few quotes from the company's most recent investor presentation to give you an idea of BP's plan for the future plan and how it could impact the stock over time. 

2017 was a damn good year

Ever since 2010 and the Deepwater Horizon spill, there hasn't been much to celebrate when it comes to BP's performance. Just when things were starting to look better, oil prices cratered and left BP with a string of quarterly losses. Throughout that time, though, management has looked to shed unprofitable assets, lower operating costs, and bring new production on line from major capital projects. 

Well, those efforts are finally paying off: The company recently reported some good news and revealed ambitious plans for the future. This was CEO Bob Dudley's first chance since taking the helm at BP (in 2010) to take a victory lap. During the meeting, he emphasized both the achievements in 2017 and progress on its strategic goals out to 2020:

These projects, along with the ramp-up of six start-ups in 2016, have contributed to a 10% year-on-year increase in BP's reported production. It's been many years since we've done that. We're on track with our plans for 800,000 barrels of new major project production by 2020. And we've also strengthened our portfolio, creating growth for the future.

We had our most successful year in exploration since 2004, with around 1 billion barrels of oil equivalent discovered this past year. We had our best reserve replacement ratio in over a decade, estimated at 143%. And we sanctioned three new projects in Trinidad, India, and the Gulf of Mexico.

We've also seen strong growth in the Downstream. In fact, one of our best years in history in terms of earnings, with our marketing and manufacturing businesses together delivering around $1 billion of underlying earnings improvement in the year.

BP has lagged its peers in recent years in terms of generating returns and excess cash flow, and others have their own ambitious plans for improving cash flow and returns over the next few years. So it is going to be hard for BP to put together a plan that will make the company look more compelling than others, but the plan looks good in its own right.

Drilling rig in field.

Image source: Getty Images.

Cost control means shareholder returns

Those increases in production and downstream operations don't mean much if the per-barrel costs are out of control, though. But CFO Brian Gilvary noted that most of these new projects will have much lower break-even costs and should allow the company to do some other things with its cash to enhance shareholder returns:

Within a disciplined capital frame and with continuing growth in operating cash flow from the Upstream and Downstream, we expect the organic breakeven for the group to average around $50 per barrel on a full dividend basis in 2018. Looking further out, as we've said before, this is expected to reduce steadily to $35 to $40 per barrel by 2021.

As mentioned, with the share buyback program in place we expect to offset the scrip dilution in 2018 over the course of the year. Looking ahead, our intent would be to offset any ongoing scrip dilution through further buybacks over time.

BP was the first oil major to reinstate a share repurchase program. For now, though, it will only offset its scrip dividend program (distributing shares in lieu of a cash dividend). If the company truly can get its breakeven costs down to the range of $35 to $40 a barrel -- an incredibly ambitious target -- then don't be surprised if management elects to expand the buyback program.

The problem that just won't go away

It seems that every quarter for the past couple of years, Gilvary has mentioned some additional Deepwater Horizon costs even though he has said that those costs would dissipate over time. This quarter was no different, as BP had to take a significant charge related to its settlement. Here are the details that Gilvary gave for this most recent cost:

[W]ith the Deepwater Horizon court-supervised settlement program winding down, a post-tax charge of $1.7 billion was taken in the fourth quarter relating to business economic loss claims. This charge will be paid out over a multi-year period. And we now expect Gulf of Mexico oil spill payments to be just over $3 billion in 2018.

Around $1.2 billion has already been paid out in the first quarter for the scheduled criminal settlement payment, which now concludes the payments around the original criminal settlement. $550 million will be paid in the second quarter relating to the civil settlements.

And looking ahead, oil spill cash payments are expected to step down to around $2 billion in 2019 and around $1 billion thereafter.

That last part right there is one of the biggest knocks against BP. Payments to settle spill-related costs with federal, state, and local governments will total $1 billion every year for several years into the future. Even with its financials improving drastically, spill settlement costs will continue to be a drag on its results for decades. 

BP Chart

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You know, there are valuable shale plays outside the Permian

When it comes to shale drilling in the United States, the only thing that investors want to talk about is the Permian Basin. It is by far the most prolific shale basin, and producers are spending big money to consolidate their holdings in the region.

This gold rush for everything Permian is overlooking the fact that there are other shale basins in the U.S., and according to BP's chief of upstream operations, Bernard Looney, BP has some incredibly attractive shale assets on hand. Here's Looney responding to an analyst question about its shale assets:

In 2015, we had very little acreage in an area called the Bossier, or Haynesville Shale, and we identified this opportunity called SoHa, South of Haynesville. Over the last two years we have quadrupled our acreage position in this play, which is independently assessed as being possibly the most lucrative gas play in the United States. We have gone from zero rigs to six rigs drilling in the play.

The 2017 drilling program generated in excess of 40% rate of return at $3 Henry Hub. We went from zero to about 35,000 barrels a day of production in the space of 18 months and can see that production growing to over 100,000 to 150,000 barrels a day in the next four or five years. 400 drilling locations identified and probably, Jon, more than half of the capital into the Lower 48 business going into that play alone, because it is so lucrative.

The number that jumps out here is that 40% return rate at $3 per thousand cubic feet of gas -- Henry Hub is the benchmark price for natural gas in the U.S., much like Brent and West Texas Intermediate are benchmarks for crude oil. Haynesville Bossier is a shale formation in the Louisiana-East Texas area that has close proximity to the Gulf Coast, which is rapidly becoming a hub for LNG exports and petrochemical manufacturing using natural gas. That means that BP should be able to easily find customers in the region. If it truly can get those kinds of returns on $3 gas, then don't be surprised if BP starts throwing much more development capital into this asset.

What a Fool believes

BP ended 2017 on a high note, and it set itself up well in 2018, with a chance to significantly increase production that has decent rates of return, along with some downstream investments that should help to round out the portfolio of vertically integrated assets. It's also encouraging that management has decided the company is in a position to buy back shares, albeit to only offset dilution for now. Hopefully, that will be the first step toward other more shareholder-friendly moves such as a dividend increase -- something BP hasn't done since 2014 -- or even buying back shares with the aim of reducing share count. 

The one blemish on the company's record is, and will continue to be for several years, the Deepwater Horizon payments, which handicaps the company's earnings compared to its peers. That is part of the reason BP's stock carries a 5.6% yield and why many investors will likely flock to other big oil stocks first