* Rating agency cites resilience to oil price volatility
* Says Gulf of Mexico spill settlement offers clarity
(Adds details, background)
By Ron Bousso
LONDON, June 8 Moody's upgraded BP's
credit rating for the first time in 19 years on Thursday, citing
a strong performance despite oil price volatility and greater
fiscal clarity following a $20 billion settlement of the deadly
2010 Gulf of Mexico spill.
The rating agency bumped BP up one notch to A1 and said the
London-based company's outlook was positive. Moody's last
upgraded BP's long-term issuer rating in 1998, a spokesman said.
"Our decision to upgrade BP to A1 factors in the increased
clarity around the size and timing of remaining cash payments
linked to the Deep Water Horizon incident, as well as expected
improvements to BP's credit metrics and its strong operating
performance despite high oil price volatility," said Elena
Nadtotchi, vice president and senior credit officer at Moody's.
The settlement of the Deepwater Horizon fines and clean up
costs in 2015 brought BP's pretax bill to more than $62 billion.
The company will pay the charge gradually into the 2030s.
BP, like other oil companies, slashed spending and costs in
the wake of a sharp drop in oil prices from mid-2014. It is
aiming to be able to general cashflow at oil prices of $35-$40 a
barrel by the end of the decade.
"BP demonstrated strong operating performance amid high
volatility in oil prices," according to Moody's.
It is set to see a sharp rise in production in the coming
years as it starts up eight projects this year, including in
Oman and Azerbaijan, the largest number in the company's history
in a single year.
The company hopes to add 800,000 barrels per day of new
production by the end of the decade.
"The positive outlook recognises that BP's strong business
profile may sustain a higher rating and anticipates that the
company will continue to deliver strong operating performance in
2017-19, supported by growth and improving profitability of the
upstream, and rising contribution from the downstream," Moody's
Of 29 analysts surveyed by Reuters, 14 have 'buy' or 'strong
buy' recommendations on BP, and 14 a 'hold' recommendation.
BP's debt at the end of March was $28.6 billion, which
represents 28 percent of the company's equity capital, also
known as gearing.
(Reporting by Ron Bousso; Editing by Mark Potter)