PRESS RELEASE: Fitch: BP's Apache Asset Sales Support Liquidity

22nd Jul 2010 15:51

Fitch Ratings-London/Chicago-22 July 2010: Fitch Ratings says that the announcement of BP Plc's ('BBB'/RWE) asset sales to Apache Corporation (Apache; 'A-'/RWN) is a positive development and will support BP's liquidity position. Asset sales remain a key factor in BP's strategy for funding the liabilities associated with the Macondo well spill in the Gulf of Mexico, and the announced USD7bn disposal agreement is an important step towards meeting BP's stated goal of approximately USD10bn in asset sales. On 21 July 2010 BP announced that it had reached an agreement with Apache for the sale of certain Canadian, US and Egyptian assets. Under the announced terms of the agreement, Apache will make a USD5bn cash payment to BP on 30 July and the remaining USD2bn payments are expected in Q310-Q410, subject to regulatory clearance of the related disposals. These assets contain proven (1p) reserves of approximately 385 million boe, total proven and probable reserves of approximately 566 million boe, and produce approximately 83,000 boepd. These levels represent approximately 3% of BP's total reserves and just over 2% of its 2009 production of 3.95 million boepd, respectively. Separately, Fitch believes that BP may continue to contemplate additional asset disposals, which could result in the USD10bn target being exceeded and a further strengthening of BP's liquidity position (For more information, see Fitch comment: "Fitch: No Formal Obstacles to Sale of PanAmerican Energy", dated 14 July 2010). BP's exposure to liabilities related to its Gulf of Mexico activities has resulted in a number of changes to the group's strategy. These include the suspension of interim dividends in 2010, a significant reduction in capital expenditure for 2010 as well as acceleration of its divestment programme focusing on non-core upstream assets. Fitch reiterates that, despite positive measures taken by BP's management, significant uncertainty remains regarding the ultimate amount of financial liabilities and the timing of related payments that BP will have to make over the next few years. In addition, the agency notes that downside risks remain until the well is definitively plugged, despite successful efforts to cap the well temporarily. The possibility of further negative rating actions would arise from a combination of factors including: BP's failure to complete the relief wells and stop the oil flow within the expected timeline (mid-August 2010); the potential for yet higher financial claims than Fitch's estimates; the acceleration of individual exposures into immediate cash demands; and possible US legislative changes that widen BP's immediate payment responsibility beyond containment and clean-up costs. On the other hand, it is still possible that payments may either turn out to be much lower than Fitch's expectations, or that they may be skewed more to the longer-term, both of which would be favorable to BP's credit profile. Stopping the leak permanently when or before the relief wells are completed in mid-August would also be credit-positive and is likely to facilitate a more precise assessment of BP's ultimate financial exposure. Given the fluidity of events, ratings remain on Rating Watch Evolving and Fitch will adjust its assessment of BP's creditworthiness as developments further unfold.For further details on Fitch's analysis, please see the credit update report on BP dated 23 June 2010. Current BP group ratings:BP plc's Long-term IDR: 'BBB', Rating Watch EvolvingBP plc's Short-term IDR: 'F3', Rating Watch EvolvingBP Capital Markets plc senior unsecured notes: 'BBB', Rating Watch Evolving Applicable criteria, 'Corporate Rating Methodology', dated 24 November 2009, are available at www.fitchratings.com. >> Fitch has made major improvements to its credit research on EMEA and AsiaPac corporates. To view these improvements, visit our 'Clear Thinking' web page at http://clearthinking.fitchratings.co.uk/Index.html Contacts: Apostolos Bantis, London, Tel: +44 20 7682 7416; Jeffrey Woodruff, CFA +44 20 7682 7322,; Erwin VanLumich, CFA, Barcelona, +34 93 323 8403,; Mark C. Sadeghian, CFA, Chicago, +1-312-368-2090 Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: [email protected]. Additional information is available at www.fitchratings.com. The issuer did not participate in the rating process other than through the medium of its public disclosure. Related Research: Corporate Rating Methodologyhttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=489018 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. (END) Dow Jones Newswires July 22, 2010 10:51 ET (14:51 GMT)