>>BP’s Ratings Cut by Moody’s, Fitch on Gulf Oil Spill Fallout
By Eduard Gismatullin
June 3 (Bloomberg) -- BP Plc had its credit ratings cut by Moody’s Investors Service and Fitch Ratings on concern that the cost of cleaning up the Gulf of Mexico oil spill will hurt the company’s balance sheet.
Moody’s lowered BP’s senior unsecured ratings by one step to Aa2 from Aa1, according to a statement today. Fitch cut BP’s long-term issuer default rating and senior unsecured rating one notch to AA from AA+. Both ratings services held out the possibility of further downgrades.
The oil spill will “result in significant containment and clean-up costs as well as litigation costs,” Moody’s said.
BP has lost 33 percent of its market value since an April 20 fire in the Gulf of Mexico killed 11 workers, sank a $365 million rig and triggered subsea leaks that have spewed millions of gallons of crude into the Gulf. The U.S. hurricane season, which began June 1 and ends Nov. 30, may be one of the most active on record, potentially hampering BP’s efforts as response cost rose to at least $990 million, or about $24 million a day.
BP pared gains to trade 1.9 percent higher at 437.80 pence as of 2:45 p.m. in London. The stock earlier rose as much as 4.7 percent.
The ratings may be cut again if the oil well flow rate continues to increase and the relief well currently being drilling fails to halt the leak “in a timely fashion,” Fitch said. Clean-up costs exceeding Fitch’s worst-case expectations of about $5 billion in any one year could also put pressure on the rating, it said.
To contact the reporter on this story: Stephen Cunningham at scunningha10@bloomberg.net
Last Updated: June 3, 2010 09:46 EDT
_______________________________________________________
If you take anything I say as advice, you're crazier than I am.
