BP (BP)

Financing the Group's Activities

        The Group's principal commodity, oil, is priced internationally in US dollars. Group policy has been to minimize economic exposure to currency movements by financing operations with US dollar debt wherever possible, otherwise by using currency swaps when funds have been raised in currencies other than US dollars.

        The Group's finance debt is almost entirely in US dollars and at December 31, 2004 amounted to $23,091 million (2003 $22,325 million) of which $10,184 million (2003 $9,456 million) was short term.

        Net debt was $21,607 million at the end of 2004, a decrease of $1,414 million compared with 2003. The ratio of net debt to net debt plus equity was 22% at the end of 2004 and 22% at the end of 2003.

        The maturity profile and fixed/floating rate characteristics of the Group's debt are described in Item 18 — Financial Statements — Notes 27 and 30 on pages F-43 and F-53, respectively.

        We have in place a European Debt Issuance Programme (DIP) under which the Group may raise $8 billion of debt for maturities of one month or longer. At June 28, 2005, the amount drawn down against the DIP was $5,987 million.

        In addition, the Group has in place a US Shelf Registration under which it may raise $6 billion of debt for maturities of one month or longer. At June 28, 2005 $5,475 million had been raised under the US Shelf Registration.

        Commercial paper markets in the USA and Europe are a primary source of liquidity for the Group. At December 31, 2004 the outstanding commercial paper amounted to $4,180 million (2003 $4,243 million).

        BP believes that, taking into account the substantial amounts of undrawn borrowing facilities available, the Group has sufficient working capital for foreseeable requirements.

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        In addition to reported debt, BP uses conventional off balance sheet arrangements such as operating leases and borrowings in joint ventures and associated undertakings. At December 31, 2004 the Group's share of third party borrowings of joint ventures and associated undertakings was $2,821 million (2003 $2,151 million) and $1,048 million (2003 $922 million) respectively. These amounts are not reflected in the Group's debt on the balance sheet.

        The Group has issued third party guarantees under which amounts outstanding at December 31, 2004 are summarized below. Some guarantees outstanding are in respect of borrowings of joint ventures and associated undertakings noted above.

        At December 31, 2004 contracts had been placed for authorized future capital expenditure estimated at $6,765 million. Such expenditure is expected to be financed largely by cash flow from operating activities. The Group also has access to significant sources of liquidity in the form of committed facilities and other funding through the capital markets. At December 31, 2004, the Group had available undrawn committed borrowing facilities of $4,500 million ($3,700 million at December 31, 2003).

Financing the Group's Activities

        The Group's principal commodity, oil, is priced internationally in US dollars. Group policy has been to minimize economic exposure to currency movements by financing operations with US dollar debt wherever possible, otherwise by using currency swaps when funds have been raised in currencies other than US dollars.

        The Group's finance debt is almost entirely in US dollars and at December 31, 2004 amounted to $23,091 million (2003 $22,325 million) of which $10,184 million (2003 $9,456 million) was short term.

        Net debt was $21,607 million at the end of 2004, a decrease of $1,414 million compared with 2003. The ratio of net debt to net debt plus equity was 22% at the end of 2004 and 22% at the end of 2003.

        The maturity profile and fixed/floating rate characteristics of the Group's debt are described in Item 18 — Financial Statements — Notes 27 and 30 on pages F-44 and F-54, respectively.

        We have in place a European Debt Issuance Programme (DIP) under which the Group may raise $8 billion of debt for maturities of one month or longer. At June 28, 2005, the amount drawn down against the DIP was $5,987 million.

        In addition, the Group has in place a US Shelf Registration under which it may raise $6 billion of debt for maturities of one month or longer. At June 28, 2005 $5,475 million had been raised under the US Shelf Registration.

        Commercial paper markets in the USA and Europe are a primary source of liquidity for the Group. At December 31, 2004 the outstanding commercial paper amounted to $4,180 million (2003 $4,243 million).

        BP believes that, taking into account the substantial amounts of undrawn borrowing facilities available, the Group has sufficient working capital for foreseeable requirements.

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        In addition to reported debt, BP uses conventional off balance sheet arrangements such as operating leases and borrowings in joint ventures and associated undertakings. At December 31, 2004 the Group's share of third party borrowings of joint ventures and associated undertakings was $2,821 million (2003 $2,151 million) and $1,048 million (2003 $922 million) respectively. These amounts are not reflected in the Group's debt on the balance sheet.

        The Group has issued third party guarantees under which amounts outstanding at December 31, 2004 are summarized below. Some guarantees outstanding are in respect of borrowings of joint ventures and associated undertakings noted above.

        At December 31, 2004 contracts had been placed for authorized future capital expenditure estimated at $6,765 million. Such expenditure is expected to be financed largely by cash flow from operating activities. The Group also has access to significant sources of liquidity in the form of committed facilities and other funding through the capital markets. At December 31, 2004, the Group had available undrawn committed borrowing facilities of $4,500 million ($3,700 million at December 31, 2003).