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Announcement:

Moody's: BP's A2/P-1 ratings likely to withstand up to USD40 billion of Macondo-related costs

Global Credit Research - 24 Feb 2012

London, 24 February 2012 -- BP's A2/Prime-1 ratings are likely to withstand cumulative costs related to the Macondo well accident of up to USD40 billion (net of tax), says Moody's Investors Service in an Analysis report published today. The MDL 2179 proceedings, scheduled to begin on 27 February 2012, will be instrumental in determining the magnitude of the total costs BP will ultimately have to bear as a result of the explosion of the Deepwater Horizon oil rig in April 2010, which resulted in 11 fatalities and the Gulf of Mexico oil spill from the Macondo well.

"Considerable uncertainty remains regarding potential additional calls on BP's cash flow ahead of the proceedings," says Francois Lauras, a Vice President -- Senior Credit Officer in Moody's Corporate Finance Group and author of the report. "However, we believe that BP's robust underlying cash flow, its prudent financial policies and the likely additional divestment proceeds should allow the company to absorb cumulative costs related to the Macondo well blowout of up to USD40 billion whilst sustaining credit metrics commensurate with its A2/Prime-1 ratings."

Moody's notes that, should BP be found grossly negligent, Clean Water Act (CWA) penalties could be five times greater than the USD3.5 billion currently set aside by the group to cover this cost, while punitive damages would be more likely to be awarded to plaintiffs in the course of the civil litigation. Also, the group may have to pay hefty fines as a result of the ongoing criminal inquiry by the US Department of Justice.

To date, the impact on BP's financial profile of the fatal 2010 Deepwater Horizon explosion and ensuing oil spill in the Gulf of Mexico has been relatively contained, as the costs from the accident have been fully offset by proceeds raised from the sale of non-core assets and a significant cut in shareholders' remuneration.

Official investigations point to multiple factors causing the Macondo well blowout and shared responsibilities between the parties including BP, its partners and its contractors. However, as the designated operator in charge of the project, BP is regarded as having taken a central role in the accident.

The MDL 2179 limitation and liability trial should help determine who was to blame for the Macondo accident, decide whether BP and any defendant acted with gross negligence, and apportion liabilities between the various parties involved. However, Moody's notes that this is likely to be a protracted process, as final rulings after appeals may take years to resolve.

Moody's new Analysis on BP, entitled "BP still faces significant uncertainty as Macondo trial gets under way", is available on www.moodys.com.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: London +44-20-7772-5456, New York +1-212-553-0376, 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
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Olivier Beroud
Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's: BP's A2/P-1 ratings likely to withstand up to USD40 billion of Macondo-related costs
No Related Data.

 

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