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25 Feb 2013
London, 25 February 2013 -- Considerable financial uncertainty will continue to weigh on BP plc's
credit profile until the size of the ultimate potential financial liabilities
arising from the April 2010 Macondo accident and oil spill in the Gulf
of Mexico is known, says Moody's in its latest report on BP
published today. This is despite the better clarity that has come
from a deal last year between BP and many private sector plaintiffs and
a recent settlement between the company and the US authorities resolving
all criminal charges related to the accident.
The outcome of a two-phase trial, which begins on 25 February
in New Orleans , will influence the size of the ultimate financial
penalties that BP (A2 stable) will incur. As such, Moody's
will closely monitor the progress of the proceedings to assess any credit
implications.
The new report, entitled "BP p.l.c.:
Despite Progress, Uncertainty Remains Ahead of Macondo Civil Trial",
is now available on www.moodys.com. Moody's
subscribers can access this report via the link provided at the end of
this press release.
"The trial will provide strong clues as to how Macondo will affect
BP from a credit perspective," says Francois Lauras,
a Vice President - Senior Credit Officer in Moody's Corporate
Finance Group and author of the report. "The trial will first
determine who was responsible for the accident -- including
the key point on whether BP and other defendants acted with 'gross
negligence' -- and apportion liabilities among the
defendants, and secondly determine how much oil was spilled."
A finding of gross negligence is the one outcome that would have the most
negative impact on BP's liabilities, primarily in the area
of Clean Water Act (CWA) penalties. The degree of negligence and
the amount of oil spilled will influence the size of potential fines that
could be imposed on BP under the CWA and determine the company's
exposure to other claims from US states along the Gulf Coast and outstanding
claims from individuals and businesses. However, this is
likely to be a protracted process, as final rulings after appeals
may take years to resolve.
Significantly, this trial will not rule on the amount of the monetary
awards to claimants. The ultimate assessment of penalties and damages
to be borne by BP and the other defendants will be determined in a second
trial at a later date, probably not before 2014.
Moody's estimates that so far BP has spent a total of $37.2
billion pre-tax (equivalent to $26.1 billion after
tax) on costs arising from Macondo. The figure includes the $4.5
billion criminal settlement agreed with the US authorities in late 2012
and assumes that BP will spend all of the $20 billion in the oil
spill trust compensation fund.
Although BP's financial results weakened in 2012, additional
divestment proceeds should allow the company, in the context of
its prudent financial policies, to absorb cumulative costs related
to Macondo of up to $40 billion after tax, while sustaining
credit metrics commensurate with its A2 rating. On that basis,
Moody's estimates that BP currently has headroom of around $14
billion after tax credits to cover CWA fines as well as other claims and
litigation costs not payable from the trust fund.
Moody's would expect BP's cash flows to strengthen from 2014
onwards as it begins to reap the benefits of the large roster of upstream
projects that it is working on, many of which are based in high-margin
regions. This would help strengthen the group's credit metrics
relative to their weaker positioning expected in 2013.
Subscribers can access this report via this link: http://www.moodys.com/research/BP-plc-Despite-Progress-Uncertainty-Remains-Ahead-of-Macondo-Civil-Credit-Focus--PBC_150504.
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,
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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
David?Staples
MD - Corporate Finance
Corporate Finance Group
Telephone: 00971 4237 9536
Releasing Office:
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JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's: Uncertainty from Macondo weighs on BP's credit profile
No Related Data.
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