Nov 16 - BP's USD4.5bn settlement with the US Department of
Justice and Securities and Exchange Commission is an important step towards
resolving the company's oil spill liabilities, Fitch Ratings says. But although
the settlement removes another aspect of legal uncertainty, it does not address
Clean Water Act claims, whose size cannot yet be determined.
We said in July when revising the company's Outlook to Positive that BP should
be able to cover its remaining legal costs without impairing its financial
profile, and that a comprehensive settlement of remaining liabilities for
USD15bn or less would support an upgrade. Recent asset sales have also
strengthened BP's credit profile. The company had realised USD35bn of its
USD38bn targeted asset disposal programme at end-Q312. Proceeds from the sale of
its 50% stake in TNK in Russia will further improve its liquidity, supporting
our view that the company can meet legal costs without impairing its profile.
But BP's settlement does not cover federal civil claims (including Clean Water
Act claims and federal and state Natural Resource Damages claims), private civil
or securities claims or state economic loss claims. It is therefore too early
for us to consider taking a rating action.
The determination of whether or not BP could be found grossly negligent is key
to finalising a claims settlement, as the amount of the Clean Water Act claims
varies significantly. A civil trial that will determine negligence is due to
begin in New Orleans in February 2013.
Other factors that could contribute to an upgrade to 'A+' for BP beyond the
legal issues discussed above would primarily relate to a combination of the
successful implementation of the company's upstream business strategy unveiled
in October 2011 and achieving a financial profile similar to that of
higher-rated oil and gas peers.