Capital disclosures and net debt

12 Months Ended

Dec. 31, 2023

Subclassifications of assets, liabilities and equities [abstract]

Capital disclosures and analysis of changes in net debt

Capital disclosures and net debt

The group defines capital as total equity plus net debt. Our financial framework seeks to support the pursuit of value growth for shareholders while maintaining a secure financial base.

The group monitors capital on the basis of gearing, that is, the ratio of net debt to the total of net debt plus total equity. Net debt is calculated as finance debt, as shown in the balance sheet, plus the fair value of associated derivative financial instruments that are used to hedge foreign exchange and interest rate risks relating to finance debt for which hedge accounting is applied, less cash and cash equivalents. Net debt and gearing are non-IFRS measures. bp believes these measures provide useful information to investors. Net debt enables investors to see the economic effect of finance debt, related hedges and cash and cash equivalents in total. Gearing enables investors to see how significant net debt is relative to total equity. The derivatives are reported on the balance sheet within the headings ‘Derivative financial instruments’. All components of equity are included in the denominator of the calculation.

At 31 December 2023, gearing was 19.7% (2022 20.5%).

		$ million
At 31 December	2023	2022
Finance debt	51,954	46,944
Less: fair value asset (liability) of hedges related to finance debta	(1,988)	(3,673)
	53,942	50,617
Less: cash and cash equivalents	33,030	29,195
Net debt	20,912	21,422
Total equity	85,493	82,990
Gearing	19.7%	20.5%

aDerivative financial instruments entered into for the purpose of managing interest rate and foreign currency exchange risk associated with net debt with a fair value liability position of $73 million (2022 liability of $91 million) are not included in the calculation of net debt shown above as hedge accounting was not applied for these instruments.

Certain subsidiaries in the group have externally imposed capital requirements and have been in compliance with these requirements throughout the year.

An analysis of changes in liabilities arising from financing activities is provided below.

					$ million
	Finance debt	Currency swapsa	Lease liabilities	Net partner payable for leases entered into on behalf of joint operations	Total liabilities arising from financing activities
At 1 January 2023	46,944	5,312	8,549	42	60,847
Exchange adjustments	33	—	132	1	166
Net financing cash flow	3,040	(213)	(2,560)	(22)	245
Fair value (gains) losses	1,389	(2,065)	—	—	(676)
New and remeasured leases/joint operations payables	—	—	4,956	10	4,966
Other movementsb	548	(56)	44	(1)	535
At 31 December 2023	51,954	2,978	11,121	30	66,083
At 1 January 2022	61,176	481	8,611	250	70,518
Exchange adjustments	(164)	—	(260)	1	(423)
Net financing cash flow	(10,855)	(192)	(1,961)	(29)	(13,037)
Fair value (gains) losses	(3,694)	5,023	—	—	1,329
New and remeasured leases/joint operations payables	—	—	2,367	21	2,388
Other movementsc	481	—	(208)	(201)	72
At 31 December 2022	46,944	5,312	8,549	42	60,847

aCurrency swaps include cross currency interest rate swaps.

b2023 other movements in finance debt include $545 million acquired with TravelCenters of America.

c2022 other movements in finance debt include $1,044 million acquired with Archaea Energy Inc. and a non-cash reduction in balances related to the Alaska divestment. Other movements in the net partner payable for leases entered into on behalf of joint operations primarily represent transfers to amounts held for sale.

The finance debt and currency swap balances above do not include accrued interest, which is reported within other receivables and other payables on the balance sheet and for which the associated cash flows are presented as operating cash flows in the group cash flow statement. The currency swaps are reported on the balance sheet within the headings 'Derivative financial instruments' and are subsets of both derivatives held for trading and derivatives designated in fair value hedge relationships as detailed in Note 30. When hedge accounting is applied to these derivatives they are included in the calculation of net debt shown above.

In addition to the liabilities included in the table above the group has accrued $746 million (2022 $497 million) at the balance sheet date for shares repurchased between the end of the reporting period and 6 February 2024. $7,918 million (2022 $9,996 million) is included in financing activities in the group cash flow statement for the cash used to repurchase shares during the year.