MOODY'S INVESTORS UPGRADES TO Aa3 THE LONG-TERM DEBT RATINGS OF BRITISH PETROLEUM COMPANY PLC AND ITS SUBSIDIARIES
New York, 11-02-95 -- Moody's Investors Service upgraded the long-term debt and counterparty ratings of British Petroleum Company's guaranteed subsidiaries to Aa3 from A1, concluding a rating review announced on September 12, 1995. The commercial paper ratings for subsidiaries guaranteed by British Petroleum (BP), which were not under review, are confirmed at Prime-1.
Moody's rating upgrade reflects BP's progress in improving its financial and operating profile over the past three years, as well as an outlook for improved results in the medium-term due to rising petroleum production and a better focus on operating and overhead costs. BP has substantially reduced its heavy debt burden and fixed charges via a major asset sales program, refinancings, and re-channeling of cash flow during a period of lower capital spending. The company is approaching its own targeted goal of sustained debt in the $8 billion area.
In the process, BP has also streamlined its core operations and established a more successful exploration and production program, leading to higher levels of reserve replacement at more competitive costs. Its efforts have included more focused exploration for potentially large discoveries, as well as large workforce reductions across all business lines. The combination of lower costs and a more focused investment program should support higher levels of production and improved profitability, even in an environment of low oil and natural gas prices, and a generally reduced capital program, which is expected to remain in the area of $5 billion per annum.
BP's returns in the medium-term will continue to be affected by overcapacity and by extremely competitive margin conditions in its major U.S. and European refining markets, as well as by some expected softening of margins in its chemical businesses. However, the company's balance sheet is stronger and future writedowns and restructuring costs in the downstream businesses should not have a serious impact on BP's financial position.
Securities upgraded to Aa3 are the senior debt obligations of the following guaranteed entities: BP America, Inc; BP Canadian Holdings Ltd.; BP Capital B.V.; BP Developments Australia Limited; BP Finance Australia Ltd.; BP North America Finance Corp.; Kennecott Copper; Sohio/BP Trans Alaska Pipeline; Standard Oil Company; and various revenue bonds. Also upgraded are the counterparty ratings of BP, BP America, and BP International Limited.
The British Petroleum Company PLC, one of the world's largest integrated petroleum companies, is headquartered in London, England.
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