DBRS Confirms BP at “A”, Stable Trend

DBRS has today confirmed the Issuer Rating of BP p.l.c. (BP or the Company) at “A” with a Stable trend. The rating confirmation reflects significant measures taken by BP to restore and sustain its financial metrics in line with the “A” rating since the Macondo well oil spill (the Spill) on April 22, 2010 (permanently capped in September 2010). The current rating factors in the Company’s estimated $41 billion in liabilities related to the Spill, and a reasonable level of additional potential future contingent liabilities. The rating is also supported by the significant steps taken by BP to improve risk management and operational safety and reliability.

After the Spill, BP decreased capital spending and dividends significantly while disposing of non-core assets to preserve financial stability. As a result, BP’s financial profile has rebounded significantly from 2010 when Spill-related cash flows considerably weakened its financial metrics. DBRS believes that the Company’s financial profile is reasonable to fund future liabilities stemming from the Spill. Payments to the $20 billion Spill claims fund are expected to be completed in 2012. In addition, approximately $5 billion of the $21 billion provision remained to cover future clean-up and other costs as at September 30, 2011, which should be sufficient. Debt-to-capital and debt-to-cash flow were reasonable at 29.1% and 1.14 times, respectively, for the last 12 months to September 30, 2011. BP has continued to generate strong cash flow, and DBRS expects it to grow production and reserves from a somewhat smaller but still substantial asset base.

BP has also realigned its operations to focus on safety and risk management. Significant upstream maintenance turnarounds have been performed organization-wide. In addition, new, voluntary standards for deepwater drilling have been undertaken, and the upstream operations have been reshaped to increase accountability among operating segments.

Overall, the Company’s financial profile has improved, with the current rating supported by BP’s improved operations, future growth prospects and adequate liquidity to fund potential obligations based on DBRS settlement scenarios for punitive damages related to the Spill.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Oil and Gas Companies, which can be found on our website under Methodologies.