London, 03 February 2012 -- The following release represents Moody's Investors Service's summary
credit opinion on BP p.l.c. and includes certain
regulatory disclosures regarding its ratings. This release does
not constitute any change in Moody's ratings or rating rationale for BP
p.l.c.
Moody's current ratings on BP p.l.c. and its
affiliates are:
Long Term Issuer rating of A2
BACKED LT IRB/PC (foreign currency) rating of A2
BP Capital Markets plc
BACKED Senior Unsecured (domestic and foreign currency) ratings of A2
BACKED Senior Unsecured MTN Program (foreign currency) ratings of (P)A2
BACKED Senior Unsecured Shelf (foreign currency) ratings of (P)A2
BACKED Commercial Paper (foreign currency) ratings of P-1
BACKED Other Short Term (foreign currency) ratings of (P)P-1
BP Capital Markets America Inc
BACKED Senior Unsecured (domestic currency) ratings of A2
BP Corporation North America, Inc.
Long Term Issuer (foreign currency) rating of Baa1
BACKED Senior Unsecured MTN Program (domestic currency) ratings of (P)A2
BACKED Commercial Paper (domestic currency) ratings of P-1
BACKED Other Short Term (domestic currency) ratings of (P)P-1
BP AMI Leasing, Inc.
Backed Senior Unsecured (domestic currency) rating of A2
RATINGS RATIONALE
BP's A2/P-1 ratings with a stable outlook reflect our view
that the group will be able to sustain financial metrics commensurate
with the ratings under a range of likely outcomes for the ultimate total
costs resulting from the Macondo oil spill, including after-tax
expenses and cash outlays of up to around USD40 billion. While
BP has to date taken a total charge of USD41 billion (USD28 billion post-tax)
in relation with the Gulf of Mexico (GoM) accident, the current
ratings acknowledge that ultimate costs could potentially be substantially
higher, having considered scenarios in which (1) fines and penalties
are at the top end of the range stipulated under the Clean Water Act (CWA);
and (2) damages are significantly in excess of the USD20 billion escrow
fund set up to satisfy OPA 90 claims under the Gulf Coast Claims Facility
and claims for damages.
The rating also reflects our expectation that BP will maintain prudent
financial policies in the context of its "value growth" strategy,
which should be underpinned by continued active portfolio management and
the establishment of new partnerships allowing the group to secure access
to highly prospective hydrocarbon provinces. Although BP resumed
dividend payment in March 2011, we note that the payout was rebased
at half its pre-Macondo level. BP's ability to pay
very large fines and legal claims is underpinned by annual cash flow generation
in excess of USD30 billion and a sizeable base of potentially saleable
assets. While the termination of the USD7 billion Pan American
Energy transaction makes it unlikely that BP will meet its original target
to divest up to USD30 billion of assets by the end of 2011, we note
that the group has to date agreed asset sales for a total of USD21 billion.
Furthermore, management has recently announced its intention to
raise a further USD15 billion from the sale of non-core assets
by end of 2013, including the Texas City and Carson refineries,
which should support its objective to reduce balance sheet gearing towards
the lower half of the 10-20% range.
BP's ratings also continue to be underpinned by i) an extremely
large and diversified reserve base and considerable production despite
the ongoing divestment of upstream assets that are mainly mature and low-growth,
ii) an efficient cost base characterised by comparatively low finding,
development and lifting costs and iii) a robust organic reserve replacement
track-record.
BP's rating outlook is stable. Looking ahead, given
the continued uncertainty regarding the size of the financial liabilities
that it will ultimately have to bear in connection with the Macondo accident,
we expect that BP will maintain prudent financial policies in line with
its objective to reduce balance sheet gearing towards the lower half of
the 10-20% range. The group's financial profile
and liquidity position should be underpinned by a robust operating cash
flow generation (based on our current oil price assumptions) and its recently
expanded disposal programme intended to raise a further USD15 billion
from the sale of non-core assets by the end of 2013. This,
in turn should help keep BP's credit metrics in line with an A2
rating under the range of likely outcomes that we have considered with
regard to the ultimate total costs resulting from the GoM oil spill.
An overall positive outcome for legal actions and investigations (including
the removal of the threat that BP could be found to be grossly negligent
for the Gulf of Mexico spill), together with continuing robust cash
flow generation and the maintenance of conservative financial policies
could, over time, lead to upward pressures on the rating.
Conversely, BP's rating could be downgraded should the ultimate
costs related to the Gulf of Mexico oil spill appear likely to exceed
Moody's current range of assumptions due to higher-than-expected
fines and settlements, or because a finding of gross negligence
becomes more likely, or if cash generated from operations and asset
disposals falls below expectations.
The principal methodology used in these ratings was the Global Integrated
Oil & Gas Industry Methodology published in November 2009.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following :
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
two years preceding the credit rating action. Please see the special
report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure
page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%)
and for (B) further information regarding certain affiliations that may
exist between directors of MCO and rated entities as well as (C) the names
of entities that hold ratings from MIS that have also publicly reported
to the SEC an ownership interest in MCO of more than 5%.
A member of the board of directors of this rated entity may also be a
member of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has
issued the rating.
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 Disclosures on Credit Ratings of BP p.l.c.
