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BP Gulf of Mexico Asset Recovery Overview Energy Insight – May 2014.

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1 BP Gulf of Mexico Asset Recovery Overview Energy Insight – May 2014

2 2 Tom Letchford Bio 15 years as Process Improvement consultant − SAP implementations across multiple industries − Specialization in energy sector since 2003 (ExxonMobil, Dow Chemical, Chevron, Phillips Chemical, and BP) At BP, helped build up materials management team from an outsourced group to an integral part of the supply chain organization −Left the consulting world in 2010 to join BP full time −Presently occupying role of manager of Gulf of Mexico (GoM) Material Coordination Has played a leadership role to re-invigorate GoM’s use of asset recovery partners to increase value. Enjoys Dilbert, but still is one of those people who always ends up volunteering to ‘take on this year’s intern’!

3 3 There was a time when we were… (at 186 storage sites in 6 states) Conducting physical inventories & updating records Bar coding equipment otherwise unidentified Repackaging poorly maintained materials Certifying spreader bars & slings to see if they were usable Classifying items by condition codes And, sometimes, disposing of non-usable materials!

4 4 We were in the weeds!

5 5 Preservation & Maintenance Facility

6 6 P&M Facility – Update & Move Plan Opened doors – February-01-2007 First truck arrival – February-09-2007 Expectation – three (3) trucks inbound daily Estimated number of trucks = 360 Over 3000 different items

7 7 Pallet Rack Area

8 8 High Bay Area

9 9 Back then, the program goals were to… Consolidate sites – cut down on the effort Reduce vendor storage costs Improve visibility of inventory Reduce risks from obsolete and poorly maintained materials and equipment (Dispose unwarranted materials) – an afterthought?

10 10 Where are we now? Preservation and Maintenance Facility close to 100% capacity. BP’s equipment and materials at 35 sites in Texas and Louisiana Asset recovery and dispositions process institutionalized Program goals mix both inventory right sizing and cost recovery Program impact is top line deliverable for Upstream Segment

11 11 The essentials of our disposition process Identify Vet Dispose  Rationalizations  Post-job returns  Standardization projects  Inventory analysis / E&O reviews  Gather documentation  Seek asset approvals and finance concurrence  Get partner approval if required  Redeploy  Return  Sell  Auction  Scrap  Donate

12 12 Location Rationalizations End Of Life Material Sent from Offshore TEXT Redeployment Standardizations The MM Rationalizations Team conducts inventories, works discrepancies and generates an initial review list Material is often sent to the Shore Base and the PMF marked as surplus. We cleanse the PMF once per quarter and the Shore Base ongoing. Ad hoc obsolete inventory notifications from engineering efforts to reduce hub-specific materials or from updated drilling/ completion techniques. Sometimes driven by Global teams - both Engineering and MM. Identify Vet Dispos e Inputs into the pipeline Project Leftovers!

13 13 Development of Disposition Memorandum Inventory of Materials (Physical) Inventory Substitution Review (GoM) Reason for Disposition In Accordance With JOA Description / Pictures of Material Physical Location A Keep / Sell Decision Maker Estimated Book Value Narrative, History, Recommendations Financial Ownership (SAP) Verification of Condition Information required for “disposition memorandum”

14 14 2014 Plan for improved identification and vetting Identify Optimization Opportunity Identify Surplus Candidates Resolve Candidates Asset Recovery Opportunity Gap Inventory Rationalization Process: Segmentation Process: Keep/Move/Sell Inventory Rationalization Process The Line: Keep/Move/Sell Disposition Process: Redeploy, Resell, or Recycle

15 15 Explaining the opportunity Identify Optimization Opportunity Opportunity Gap FunctionPlannedSparesExcess over max Non- standard To be reviewed Surplus Drilling$10m$2m$0.5m Completion Equipment $7m$2m$3m$1m$2m Subsea Tools & Equipment $3m$5m$0.5m$1m$0.5m$2m Topsides inventory $2m$4m$1.5m$0.25m$0.5m$0.25m Id’d through business as usual Id’d through specific efforts 1. Inventory walk downs 2. Data analysis project 3. Collaboration with Engineering 4. Review of reliability data Time? Priority?

16 16 Summary Reactive approach may feel necessary at the outset – but migrate to a process quickly Engage “material owners” early and often for best results Embed asset recovery as logical output to other materials management processes Use your partners to help you: −Improve opportunity identification −Establish priorities −Improve disposition options Keep your metrics!

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