Fitch deals BP new blow

15th Jun 2010 15:07

Ratings agency Fitch has reduced its rating for BP to a level barely above junk status.The oil giant's credit rating has been lowered by six grades to "BBB" from "AA" on concerns over the ballooning cost of the response to the Gulf of Mexico oil spill. The ratings agency also expressed concerns at calls from US lawmakers for the multinational oil company to put a pile of money into escrow to pay for any liability claims.Fitch said the announcement from the US Geological Survey that the amount of oil spilling out into the Gulf may be more than double original estimates "will materially increase BP's exposure to Justice Department fines."Democrat senator Harry Reid on Monday called for BP to set aside $20bn to pay compensation to victims of the spill. The requirement to set aside such a large sum would limit BP's fundamental financial flexibility.But it seems the company's rivals are no better prepared for a disaster offshore than the UK firm.Exxon-Mobil, Chevron, ConocoPhillips and Shell, all drilling off the US coast, have the same response plans as under-fire BP, chairman of a Congressional panel Henry Waxman told the House energy and commerce committee.BP has been accused of cutting costs with no regard for the consequences after Congressional investigators uncovered confidential e-mails revealing a disagreement between the company and US contractor Halliburton."Every time they had a decision to make they decided to cut corners; to do things faster than they otherwise should have been done; to do it less expensively and the consequence of this, as one independent expert told us, was horribly negligent," Waxman said last night. Waxman highlighted one e-mail sent just four days before the explosion, in which a BP official vetoed the recommendation by Halliburton, the US oilfield services group, to use 21 "centralisers" in the well bore on the grounds it would take too long to install them, In the end BP decided to use six centralisers. A number of oil company chief executives appeared before the Committee on Tuesday to face questions over deepwater drilling and sought to convince the lawmakers that their company's safety procedures were better than BP's, and that another oil spill of such magnitude would be unlikely to happen again. BP's US boss, Lamar McKay, is due to appear before the Committee while BP chief executive Tony Hayward will face a separate House hearing on Thursday