BP PLC

bp has a resilient financial framework that, taken together with our strategy, creates a compelling investor proposition offering committed distributions, profitable growth and sustainable value. The framework comprises a coherent approach to capital allocation, a resilient balance sheet, a disciplined approach to investment allocation and a relentless focus on executing bp’s business plan.

bp’s approach to capital allocation leads to a clear set of priorities – funding our resilient dividend as the first priority, maintaining a strong investment grade credit rating, disciplined investment in our transition growth« engines to advance our energy transition strategy and investment in oil, gas, refining and other businesses, and then returning surplus cash flow« as share buybacks. In a period of low prices, the group has the flexibility to reduce cash costs and to reduce or defer capital investment, as appropriate.

Our shareholder distribution policy reflects these priorities for the uses of cash alongside an ongoing consideration of factors, including changes in the environment, the underlying performance of the business, the outlook for the group financial framework, and other market factors which may vary quarter to quarter.

Net debt« at 31 December 2023 was $20.9 billion and is expected to reduce in line with the growth in operating cash flow«. As at 31 December 2023 our target of $25 billion of divestment and other proceeds between the second half of 2020 and 2025 was underpinned by agreed or completed transactions of around $18.5 billion with $17.8 billion of proceeds received.

We expect operating cash flow to cover capital expenditure« and the dividend. Capital expenditure in 2023 was $16.3 billion, including $1.3 billion of inorganic capital expenditure«. bp expects capital expenditure of around $16 billion through 2024 and 2025 and expects a range of $14-18 billion per annum through 2030 including inorganic expenditure. bp's cash balancing point is expected to average around $40 per barrel Brent (assuming an average refining marker margin of around $11 per barrel and Henry Hub gas price at $3 per mmBtu) in 2021 real terms.

In 2023, the return on average capital employed« was 18.1%a at an average of $83 per barrel. The return on average capital employed is targeted to be over 18% by 2025 at $70 per barrel in 2021 real terms, and assuming bp planning assumptions, as we continue to execute our strategy. This is supported by an expected growth on adjusted EBIDA per share compound annual growth rate« from the second half 2019/first half 2020 b to 2025 and subject to the same price and planning assumptions.

a Nearest equivalent IFRS measures of numerator and denominator are profit for the year attributable to bp shareholders and total equity respectively: Profit for the year attributable to bp shareholders divided by total equity at the end of 2023 17.8%.

b Adjusted to exclude Rosneft.