DBRS Comments on Gulf of Mexico Oil Spill from BP-Operated Drilling Rig

DBRS notes that BP p.l.c. (BP or the Company) recently announced that it has stopped the flow of oil from one of three existing leak points on the damaged Deepwater Horizon drilling rig in the Gulf of Mexico (GOM). While not expected to affect the overall rate of flow from the well, the move is expected to reduce the complexity of the situation. BP has indicated that it plans to transport a first containment dome to the well site where it is currently expected to be lowered to the seabed in approximately three days, following which the effectiveness of the system can be evaluated. Current estimates by the U.S. National Oceanic and Atmospheric Administration suggest that approximately 5,000 barrels (210,000 U.S. gallons) of oil per day are escaping from the well.

DBRS believes that, based on currently available information, the Company could absorb the impact of the GOM oil spill (including cleanup and other costs related to the spill) while remaining at its current DBRS rating of AA (high). DBRS estimates that BP had a book equity value of $104 billion and a net debt-to-capital ratio of 20% at March 31, 2010, and a net debt-to-cash flow ratio of 0.74 times for the 12 months ending March 31, 2010. However, should the potential total liability estimates escalate significantly, negative rating action could occur. DBRS will continue to monitor and assess the situation and take appropriate action as more information becomes available.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Oil & Gas Companies, which can be found on the DBRS website under Methodologies.

This is a Corporate rating.