BP Gulf of Mexico Asset Recovery Overview

Energy Insight – May 2014

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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’!

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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!

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We were in the weeds!

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Preservation & Maintenance Facility

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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

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Pallet Rack Area

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High Bay Area

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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?

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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

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The essentials of our disposition process

Identify Vet Dispose

RationalizationsPost-job returnsStandardization projects

Inventory analysis / E&O reviews

Gather documentation

Seek asset approvals and finance concurrence

Get partner approval if required

RedeployReturnSellAuctionScrapDonate

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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 Dispose

Inputs into the pipeline

Project Leftovers!

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Development of Disposition

Memorandum

Inventory ofMaterials(Physical)

Inventory Substitution

Review(GoM)

Reason for Disposition

In AccordanceWith JOA

Description /

Pictures of

Material

Physical Location

A Keep / Sell

Decision Maker

Estimated Book Value

Narrative, History,

Recommendations

FinancialOwnership

(SAP)

Verification of

Condition

Information required for “disposition memorandum”

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2014 Plan for improved identification and vetting

Identify Optimizati

on Opportunit

y

Identify Surplus

Candidates

Resolve Candidate

s

Asset Recovery

Opportunity Gap

Inventory Rationalizatio

n Process: Segmentation

Process: Keep/Move/Sell

Inventory Rationalizatio

n Process The Line:

Keep/Move/Sell

Disposition Process: Redeploy, Resell, or Recycle

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Explaining the opportunity

Identify Optimizati

on Opportunit

y

Opportunity Gap

Function Planned Spares

Excess over max

Non-standard

To be reviewed

Surplus

Drilling $10m $2m $0.5m $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?

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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!