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Announcement:

Moody's: BP risks large claims as Macondo proceedings continue

Global Credit Research - 01 Oct 2013

New York, October 01, 2013 -- BP plc can tolerate a moderate penalty related to the 2010 Macondo oil spill without compromising its credit quality, Moody's Investors Service says in a new report, "BP Still Risks Big Claims as Macondo Proceedings Enter Second Phase." But a severe penalty resulting from a finding of gross negligence would change the equation, as PSC settlement costs keep mounting.

Phase 2 of the trial to determine limitation and liability begins 30 September. It will be critical in determining how much money the parties involved will have to pay in penalties, though actual amounts will be decided in a separate, later trial.

"BP can tolerate about $40 billion in penalties, after taxes, under its A2, Prime-1 ratings," says Vice President -- Senior Credit Officer, Francois Lauras. "A ruling in line with the company's current $3.5 billion provision would leave some headroom to absorb other charges, including PSC settlement costs from payouts awarded for business economic loss claims, which ultimately depend on the interpretation of the Economic and Property Damages Settlement Agreement." A US appeals court is due to decide on this in the coming weeks.

Four weeks have been scheduled for phase 2 of the case. In the first phase, the court sought to determine blame for the Deepwater Horizon blowout and apportion liabilities among the defendants. Moody's believes all rulings are likely to be deferred until after phase 2, leaving the key question -- whether BP and other defendants acted with gross negligence or engaged in willful misconduct -- unanswered in the meantime.

Other defendants in the case include Transocean Inc., Halliburton Company and Anadarko Petroleum Corp. Transocean, which owned the Deepwater Horizon rig, is exposed to sizable fines and penalties.

"Indemnifications will protect Transocean from some Macondo liabilities," says Vice President -- Senior Credit Officer, Stuart Miller, "but other items could ultimately cost the company billions of dollars to resolve."

Macondo also continues to pose liabilities for Halliburton, which provided cementing services on the well. While Halliburton contends that its service contract with BP fully indemnifies it in the Macondo proceedings, evolving multi-district litigation and other lawsuits and investigations could lead to further financial charges.

Anadarko Petroleum Corp. enters phase 2 of the trail with the least trepidation of the parties still involved. Though a broad indemnification agreement with BP does not protect the company against penalties under the US Clean Water Act, it can probably manage these without putting its ratings at risk.

Moody's research subscribers can access this report at https://www.moodys.com/research/Integrated-Oil-BP-Still-Risks-Big-Claims-as-Macondo-Proceedings--PBC_158923.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Francois Lauras
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
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United Kingdom
JOURNALISTS: 44 20 7772 5456
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Stuart Miller
VP - Senior Credit Officer
Corporate Finance Group
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Moody's: BP risks large claims as Macondo proceedings continue
No Related Data.

 

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