BP’s rating outlook has taken a hit in the wake of additional Macondo fines.
Fitch Ratings downgraded the industry giant’s default outlook from stable to negative. The firm cited outstanding fines and a dipped oil price for the slide.
A company spokesman said: “Fitch considers that ratings of oil and gas companies are dependent on how they react to lower oil prices and whether they will choose to keep credit metrics under control through CAPEX, OPEX and dividend reduction, or resort to more borrowing. BP’s flexibility in responding to low oil prices is constrained by already high leverage and a need to preserve cash in front of still uncertain Macondo-related liabilities.”
Earlier this year, BP confirmed a CAPEX reduction of $20billion.
The spokesman added: “The largest payment the company is currently facing is the Clean Water Act (CWA) fine, which in the worst case could reach $13.7billion.”
The firm originally ring-fenced $3.5billion for the ruling. To date BP has paid out more than $28billion for the disaster, which claimed 11 lives.
Despite the drop to negative, BP retained it’s a rating of A, the third highest level.
A spokesman said: “We view BP’s operational profile as strong, as it remains a leading integrated O&G producer. Its 2014 upstream production of 1.93MMbpd (without equity affiliates, such as the stake in Russia’s Rosneft) was trailing that of Royal Dutch Shell (AA/Rating Watch Negative, 2.5MMbpd), but ahead of Total SA’s (AA-/Stable, 1.5MMbpd) and ConocoPhillips’ (A/Negative, 1.4MMbpd).
“BP has strong positions in natural gas, including LNG, which accounted for 52% of its 2014 upstream production volumes. Its diversified proved reserves of 9.3bn barrels of oil equivalent (boe) (without equity affiliates) imply a healthy proved reserve life of 13 years, ahead of many of its peers.”
Alabama, Mississippi, Florida, Louisiana and Texas have all brought claims against the operator.
A spokesman added: “The total amount claimed by the five states is nearly USD35bn, which BP has not provisioned for, as it believes the claims are unsubstantiated. We do not anticipate the final damages awarded to be as much as USD35bn, but acknowledge that large legal uncertainties remain and note that legal proceedings may drag on for years.”