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Mergers & Acquisitions A BP Perspective Tony Hayward, Executive Vice President and Group Treasurer, BP p.l.c.

., United Kingdom The energy industry is in a state of significant change. Over the past three to four years, there has been significant consolidation amongst both large players (i.e. the Super-majors) and smaller companies. This change was initiated when BP acquired Amoco in 1998 and continues today. Strategic Rationale: In 1996, BP decided in favour of a merger strategy to provide BP both the scale and reach enjoyed only by its largest competitors. Since that time, inorganic growth has played a large role in BPs success. This success is underpinned by a clear strategy, sound processes and a solid financial framework. BP chose its merger partners and acquisition targets to: Add more natural gas to its portfolio North America, Trinidad and Indonesia, Build significant upstream growth positions in core basins - DeepWater Gulf of Mexico, Angola and Azerbaijan, Create a global refining and marketing stream, Establish world-class petrochemicals company; and Achieve step-change cost reductions and economies of scale.

Execution and Implementation: The success of BPs recent combinations was a result of: Setting high expectations early, communicating them widely and enforcing them consistently, Establishing clear principles and boundaries to work within, Planning and organizing, and Tracking progress.

Results: BP has built an organization having resources for the next decade, strong cash flow and a robust balance sheet, and capable of delivering both growth and returns into the future: By the end of 2002, all acquisition premiums will be recovered via synergies; All deals were accretive to BPs Return On Average Capital Employed; Operating costs were reduced by more than $6 billion annually; Portfolio trimmed by more than $19 billion in disposals; and

Built a new team with new skills to ensure delivery of superior performance.

The Future An Industry in Motion: The stage is set for continued merger and acquisition activity: The state sectors of many developing countries are reforming and privatising; Energy trading companies need access to larger and more stabile balance sheets; Utilities continue to redefine their businesses.

BPs Future Development: BP will continue to be opportunistic, guided by a simple strategy. Merger and acquisition activity must: Align BPs businesses with global market trends, and Provide economies of scale and resources for future growth.