TEXT - Fitch says $34 bln new BP claim is not a game changer

Wed Feb 6, 2013 11:29am EST

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Feb 6 - The additional USD34bn of claims filed against BP by 
four US states provides another hurdle for BP to overcome on its path to
recovery from the 2010 Gulf of Mexico oil spill. But Fitch Ratings doesn't think
that any final settlement is likely to be enough to interfere with BP's positive
medium-term credit trajectory. 

These claims come on top of the USD58bn maximum liability calculated by Fitch. 
If realised, the cost of the spill could rise up to as much as USD92bn. 

BP was only made aware of the size of these claims in January and describes the 
methodologies used to compute the claims as 'seriously flawed.' We have not seen
the computations, but past experience, in relation to other claims and US 
litigation in general, suggests any eventual pay-out will be lower. BP had 
already made an undisclosed, partial provision for these claims, which it has 
not adjusted. 

The new claims should be put in the context of a disposal programme that has 
raised USD38bn. This excludes an additional USD12bn in cash to come from the 
sale of TNK-BP this year  - upside in our analysis because we gave BP no benefit
for the TNK-BP stake. BP had USD19bn of cash on is balance sheet at 31 December 
2012. That's after it has already paid USD38bn in settlements or into escrow. 

We currently have BP's 'A' rating on a Positive Outlook, with the main trigger 
the company's ability to deliver on its ambitions upstream plans. We have 
indicated that a Department of Justice Clean Water Act fine - still likely to be
the largest component of outstanding litigation - of below USD15bn (as opposed 
to a possible maximum of USD21bn) could accelerate the upgrade. The receipt of 
funds from the TNK-BP sale would provide a further cushion. 

Further clarity on the likely outcome of the new litigation is a precondition of
any upgrade. We anticipate BP could still maintain credit metrics in line with 
an 'A' rating even if the gulf states succeed with their case. Given that we 
don't anticipate the final damage will be as much as USD34bn, we believe a 
positive outlook is still warranted.
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