Beleaguered BP suffers credit rating ignominy
Published 04/06/2010 | 09:39
Beleaguered oil giant BP has come under more pressure after its credit rating was cut amid fears over the soaring cost of the Gulf of Mexico disaster.
Concerns over the failure of repeated attempts to tackle the spill and the threat of a criminal investigation prompted ratings agency Fitch to cut the firm's credit rating from AA-plus to AA.
Moody's also cut its rating with warnings over the legal and financial burdens “likely to persist in the years to come”.
The cuts will hurt BP because they raise the cost of its funding.
BP’s shares recovered slightly yesterday after two days of heavy falls, but since the Deepwater Horizon rig exploded and sank on April 20 — killing 11 workers — around a third of its value has been wiped out.
Moody's also expressed concern over the “mounting political pressure” on BP as US politicians lined up to attack the company.
Fitch added that the firm could suffer further downgrades if investment in new projects was diverted to tackle the crisis, and the clean-up bill exceeded its current worst-case scenario of £3.4bn in any one year.
BP said earlier this week that the disaster had cost it £677m so far.
Its last “top kill” attempt to block the leaking oil well proved unsuccessful and the company is now working on using robot submarines in the latest move to stem the flow of oil.
But this technique has never been used before and it is far from certain that the procedure will work.
If it fails, the firm may be left with no other option than to rely on drilling relief wells that will take three months to complete.
Oil is spewing from the well at a rate of 12,000 to 19,000 barrels a day, meaning that between 18 and 40 million gallons has already been dumped into the Gulf. BP has said it would pay £246m to fund six barrier “islands” to protect the Louisiana coastline.